After SPIN! 1/11/15 - "What fallout could come from Goodwin's rate increase denial for NC?"
Published January 16, 2015
After SPIN! 1/11/15 - Question to Chris Fitzsimon: "State Insurance Commissioner Wayne Goodwin recently denied the rate increase for home owners insurance that had been sought by companies insuring in our state.
They wanted permission to raise rates up to 25%, but Goodwin said no rate increase was justified.
What's gonna be the fallout from this decision, are the companies going to stop offering home owners insurance or will they become even more rabid in trying to rob the commissioner from that authority?"
January 16, 2015 at 12:57 pm
Richard Hudson says:
Why would you ask Chris this question, of course he is gonna spin it in Godwin's camp. There is an underlying issue with Homeowners and dwelling fire business and it's
the threat of hurricanes on the coast. Tied into this is the fact that the beach plan writes so much of the business on the coast and does not have adequate reserves or reinsurance to withstand a major hit to our coastline. Who is left on "the hook" for these inadequacies? The homeowners writers in the state have to share in the losses based on the amount of business the have compared to other company writings in the state. The amounts are staggering.
Companies have gone to consent to rate, where they get their insureds to agree to pay a rate more than the published, 8approved rate. This is not an acceptable way of doing business to make up for inadequate rates. It puts the insureds and agents having to deal with this unpleasant letter they get. It is a big hassle and a lot of money.
If the powers that be had enough business sense, they would open up the markets in NC and let supply and demand dictate rates. You would think that the Republican controlled government could see this, but politics gets in the way. They had a chance to put us on that road last year with a bill designed to start opening up our markets. People like Tom Apocdaca nixed the bill even though he gets on his soapbox about free markets and good business climates.
As long as we have an elected official determining rates in NC we will continue to have unstable and unreliable markets.
January 18, 2015 at 1:58 am
Wayne Goodwin says:
To the contrary of what Mr. Hudson has stated, it appears that the reserves and reinsurance program of the NC Beach Plan are at their STRONGEST ever -- in large part due to the state law passed in 2009-10 (House Bill 1305) and, even much more recently, the inaugural series of catastrophe bonds that the Beach Plan has issued, creative bonds that found highly positive global financial interest.
Also strengthening the Beach Plan: the now statutory provision prohibiting the Beach Plan from returning most of its reserves to the insurance companies -- insurance companies demanding return of and benefiting from the return of surplus reserves is a part of why the Beach Plan used to be inadequate.
And, of course, another reason for the stronger Beach Plan financial picture is the relatively calm hurricane seasons North Carolina has had on the whole the last ten years.
Something else that Mr. Hudson appears not to be aware of: A significant number of private insurance companies have stated that they would not write east of U.S. Highway 17 (and to some extent east of Interstate 95) in North Carolina EVEN IF they could charge whatever they wanted, as a matter of corporate policies they've adopted for any coastal state, not just NC.
By the way, the insurance commissioners of Florida and Texas (comparable hurricane-prone states) are appointed - not elected -- and those insurance markets are certainly nowhere near as good as North Carolina's.
The bottom line is this: North Carolina's coast and beach areas have a Beach Plan that is certainly sufficient to withstand a more than $4 Billion hit, which would be a storm the size and impact of Hurricane Hazel from 1954 (adjusted for inflation), the hurricane used a barometer for such discussions. Further, if we had an unstable or unreliable market of the type Mr. Hudson suggests, then why do we have at least ninety-one (91) individual/private insurance companies actively writing homeowners insurance coverage in North Carolina?
Furthermore, the markets are indeed open in NC: Any private insurance company wanting to write homeowners insurance business in this state receives a license if it meets the actuarial and accounting and legal standards commonplace across the country and has sufficient capital and other reserves in place for the protection of consumers.
As for the separate subject of "consent to rate" letters, I respectfully suggest Mr. Hudson read the detailed footnotes of the recent homeowners insurance decision issued approximately December 18, 2014. The link is found at www.ncdoi.com ...
