North Carolina Plans Public Hearing on Dwelling Rate Hikes

North Carolina Insurance Commissioner Wayne Goodwin has called for a June 21 public hearing on a proposed 20.9 percent rate increase in dwelling fire and extended coverage rates after the Department of Insurance ruled that some portions of the filing were not justified.

The call for the public rate hearing comes weeks after more than 800 policyholders issued comments protesting against the rate increase.

The North Carolina Rate Bureau, which is not affiliated with the department, submitted the rate filing on January 4. The filing covers dwelling fire policies that are offered to homeowners whose property doesn’t meet the requirements to qualify for a standard policy. Dwelling and extended coverage policies are offered to policyholders to cover perils that extend beyond fire and lightening. That includes content coverage and coverage for physical damage to the property due to sprinkler leakage, wind, hail, vandalism and aircraft and vehicle damage. Typically, the number of policies represents a small part of the state’s total property exposure.

The bureau is actually calling for a decrease in fire policies. Based on a total state premium of $84 million, the bureau’s indicated rate change for the policies is minus 6.6. However, the decrease is more than offset by the proposed increase for extended coverage. Based on a total state premium of roughly $151 million, the bureau is calling for an average 110.3 percent increase. All together it equals the statewide average change to 20.9 percent.

DOI regulators made several objections to the filing including that it is based on old data. Typically, the ratemaking process incorporates the data from the two previous years. The department charges that although the 2009 and 2008 data was available, the rate bureau failed to compile the data and used it in the file. The rate filing contains a number of factors used to calculate the rate changes; factors such as the net cost of reinsurance and compensation for assign risk. The department charges the factors are not justified and led to a higher than necessary rate request.

The rate bureau’s methodology to set a profit factor is also under scrutiny. The department said the methodology is illegal based on a ruling by the North Carolina Supreme Court in a similar case. The department also said the filing contains a factor for deviations that the Supreme Court has shot-down in a similar number of cases involving auto rates. Regulators also argue that the model used to project hurricane losses doesn’t appear to be adequately documented or justified.

Goodwin will serve as the hearing officer, but he will withhold any comments since by law he must remain an impartial partner to the process. Goodwin has scheduled the hearing for June 21, but he has not indicated when his final ruling on the rate request might be ready.

Topics Pricing Trends North Carolina