North Carolina Lawmakers Give Few Details on Insurance Changes

By GARY D. ROBERTSON | April 12, 2012

A study committee at the Legislature examining North Carolina’s automobile insurance system approved few detailed recommendations Tuesday, leaving most of the heavy lifting to next year’s edition of the General Assembly to find specific solutions.

The committee agreed that it wants legislation that would shift the state’s roughly 7 million insured personal vehicles from the current rate system to one that relies less on a high-risk pool for drivers that insurers aren’t willing to cover. The members want to eliminate a surcharge that all insured drivers pay to keep the N.C. Reinsurance Facility solvent and want increased competition.

The insurance industry is split on what, if anything, should be changed, and state Insurance Commissioner Wayne Goodwin has been suspicious of tinkering with an insurance market that boasts average premium rates among the lowest in the country.

The committee’s report said the issues are complex and should be revisited when the Legislature returns for its budget-writing session in January, not when it comes back next month. Sen. Tom Apodaca, R-Henderson, one of the committee’s co-chairmen, told the audience of insurance industry representatives to expect proposals in early 2013.

Apodaca said in an interview afterward that he didn’t want a dramatic overhaul of the system. Some have suggested eliminating the North Carolina Rate Bureau, which files one combined annual plan to raise and lower rates for all auto insurers, or curbing Goodwin’s authority to challenge proposed rate increases.

Instead, Apodaca said he would like the laws tweaked so that those who have had moving violations could pay “a little more than they are now, instead of placing it all upon all of us who haven’t.”

“We can bring the rates even down for the majority of the good drivers,” he added. “I don’t know what the answer is, but I do think we need to do something.”

The sweet spot for change may involve the N.C. Reinsurance Facility, where those with poor driving histories pay rates that are about 30 percent higher than conventional market rates. The majority of the pool’s population is made up of so-called “clean risks” who don’t pay the higher rates but for other reasons are still considered too risky to pay the conventional rates.

Each insured driver pays a surcharge on average of less than $20 a year to cover the losses of the “clean-risk” motorists in the pool. One possibility is to allow insurance companies to charge slightly more for those “clean-risk” motorists, and reduce the surcharge in the process.

A group of insurers led by national industry leader State Farm, along with Geico, Progressive and trade associations have sought a system overhaul.

Liz Reynolds of the National Association of Mutual Insurance Companies, which is part of a coalition seeking changes, said her organization is pleased with the committee’s findings and wants a bill “that everyone can live with and achieves the objective of making North Carolina a more modern system with more benefits for consumers.”

Nationwide Insurance, which has the No. 1 automobile market share in the state, hasn’t seen the need for significant changes, saying the current rate-filing system works well and promotes industry stability. A company spokesman in Columbus, Ohio, said Nationwide was reviewing the committee’s report.

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