State orders insurance rate decrease, but insurers may still win

Editorial by Wilmington Star-News, December 22, 2014.

Friday's announcement that homeowners insurance rates in coastal counties will go down instead of up is good news for people who have watched their rates climb higher and higher.

Or is it?

According to the N.C. Department of Insurance, it is becoming increasingly common for insurers to threaten to cancel individual policies unless the home­owner signs on for rates higher than what the state allows.

Insurers say they need higher rates to be able to cover future risks and rebuilding costs in case of a hurricane or other major disaster; the insurance commissioner says the data do not support their case for a rate increase at this time.

All homeowners living in coastal counties know is that their rates keep going up, often by steep margins, even as their counterparts in other parts of the state have seen much less drastic increases (and lower rates, to begin with). An effort to build some consistency into insurance rates, brokered by the Wilmington-based Business Alliance for a Sound Economy, has provided some relief.

But in January, only six months after raising rates on home­owners an average of 7 percent last year, insurers sought another increase of up to 35 percent for residents along the coastline. On Friday, Insurance Commissioner Wayne Goodwin denied the request and instead ordered what amounted to no increase statewide.

Residents of local beach communities can expect a 5.6 percent drop in rates, while homeowners living inland in coastal counties could see decreases ranging from 1 percent to 18 percent, depending on exact location. That certainly would be refreshing news after a series of steep rate increases over the past decade.

Yet insurers still hold the upper hand, thanks to a law that allows insurers to charge considerably more. The insurance department says 30 percent of all North Carolina policies last year required homeowners to accept rates higher than what the state allows or face cancellation of their policies.

Insurance is based on risk. That is one reason that most coastal property owners pay a separate premium for wind and hail damage, while that coverage is rolled into homeowners policies in the middle and western parts of the state. But coastal property owners also have paid more for basic fire and theft insurance.

The N.C. Rate Bureau, which makes premium requests on behalf of insurers, can appeal Goodwin's decision. In the meantime, there is nothing stopping insurers from demanding the rate they want from individual homeowners. Cameron Moore, BASE's executive director, says he got such a letter a few months ago. He refused to sign.

Instead, he said he shopped around and found a lower rate. While wind and hail policies may be more limited, North Carolina has a number of insurance carriers who will write homeowners policies for fire and theft coverage. He advises residents who are asked to sign for a higher rate to look around for a better deal.

As consumers, they have nothing to lose by shopping the competition.

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