North Carolina’s Goodwin Warns Against Coastal Rate Freeze

Article

Legislative efforts to freeze insurance rate increases for coastal homeowners risk making policies less available and more costly for all state residents, North Carolina’s new insurance commissioner has warned.

Such measures would keep the state’s insurer of last resort, the Beach Plan, from charging up to 25 percent for homeowner’s coverage and up to 15 percent for wind damage more than what standard insurers can offer. The surcharges took effect Feb. 1. Some lawmakers, reacting to constituent complaints, are trying to push that date to May 1, 2011, for primary residences.

“If those rates were to be stopped,” Insurance Commissioner Wayne Goodwin said, “it could restrict or stop homeowners insurance writings in this state.”

Coastal constituents are upset about a double-whammy affecting insurance. In November, former Insurance Commissioner Jim Long said the Beach Plan could increase surcharges from up to 15 percent above what regular insurers can offer to as much as 25 percent over. The plan also raised wind damage deductibles from as little as 0.5 percent of a home’s value to 2 percent.

Beach Plan administrators said the changes are needed to assure coverage for their growing customer base. The plan now insures 170,000 properties valued at $72 billion in 18 coastal counties. They said last year they were prepared to meet $2.4 billion in claims from storms in a year, but that would have to include special assessments against insurance companies.

Then in December, the insurance department approved a statewide rate increase of about 4 percent. That included reductions for central and western counties and increases on coastal homes of up to almost 30 percent in some areas. The changes start May 1.

Goodwin said the rate changes are also needed to keep more insurers from quitting the state as several insurers have done since August. “This is to protect us from a domino effect that could affect all of North Carolina,” he said.

Several lawmakers have proposed excluding primary homes along the coast from the increases to protect year-round residents.

But blocking the increases would cause insurers to re-examine whether to do business in North Carolina, said Bob Herlong, a regional manager for the Property Casualty Insurers Association of America. “If it were blocked, that would obviously be very, very disappointing to us,” Herlong said.