RALEIGH, N.C. — While many residents of Western North Carolina still lack power and running water Hurricane HeleneA hearing began Monday on the insurance industry’s request to increase homeowners’ premiums statewide by an average of more than 42%.
A top lieutenant for Insurance Commissioner Mike Causey opened up what is expected to be several weeks of witnesses, evidence and arguments by attorneys for the state Insurance Department and the North Carolina Rate Bureau, which represents insurance companies seeking the increase.
In more than 2,000 pages of data submitted last Januarythe Rate Bureau looked for proposed increases ranging from just over 4% in parts of the mountains to 99% in some beach areas. The proposed increases in and around major cities like Raleigh, Charlotte and Greensboro are about 40%.
In eleven western counties hit hard by Helene, including Asheville’s Buncombe County, the requested increase is 20.5%. The percentages are based on insurance payments from recent years and future claim projections.
After taking public comment, Causey rejected the request in February, reason for the hearing. In previous rounds of premium requests, the industry and the commissioner negotiated settlements prior to a hearing. Before the last such hearing in early 2022, they arrived at an average premium increase of 7.9% weeks earlier, after the agency had demanded 24.5%.
This time, Causey told reporters Monday, “we couldn’t get close, so that’s why we’re here today.”
When the hearing ends, the hearing officer, in consultation with Causey, will decide within 45 days whether the proposed rates are excessive, and if so, issue an order setting new rates. That order could be challenged in the state Court of Appeals.
Rate Bureau attorney Mickey Spivey told hearing care professional Amy Funderburk that the highest inflation in four decades — especially in building materials — combined with catastrophic storms that are “getting worse” show that current premium rates are “seriously inadequate.”
Spivey cited Helene, which caused unprecedented devastation in the state’s western mountain communities, and Hurricane Florence in 2018, which caused billions of dollars in damage in eastern North Carolina, much of it paid for by insurance companies.
Not mentioned Monday: Hurricane Milton, which explosively strengthened into a Category 5 hurricane as it approached Florida on a path that was expected to largely miss North Carolina.
“Whether you want to call it climate change or not, there is no denying that we have bigger, stronger and more expensive catastrophic storms than we have ever seen in our lifetimes,” Spivey said.
Insurance department attorney Terence Friedman argued that the industry continues to use actuarial methods that ignore what state law requires when calculating interest rate increases.
Friedman said the agency’s requested rates are too high and that the department’s actuaries will demonstrate that there are “alternative recommended rates that will allow the agency’s members to earn what they are constitutionally entitled to.”
But Spivey said the Insurance Department witnesses would try to actually lower premium rates, or limit increases to less than 3%.
Not every owner’s premiums will increase or decrease with the final approved rates; There are other factors that insurers take into account when determining a bill.
Without a fair profit and the ability to cover claims, Spivey said, industrial companies will more often have to rely on a legal exception by insuring high-risk homeowners only if they agree to pay premiums at rates as high as 250% of the agency’s rate. Otherwise, he said, more insurers will stop issuing policies altogether.
The “consent to rate” exception in North Carolina law has helped prevent a mass exodus of home insurers like some states have experienced, said David Marlett, an insurance professor at Appalachian State University.
While each state has different models for regulating rates, those hit by more hurricanes and storms are essentially faced with two options, Marlett said: Allow rates to continue to rise to cover claims, or “somehow way we build structures that are able to withstand climate change. ”
Friedman criticized the agency for quoting Helene in its opening statement and said it should not be used as a reason to increase rates for storm survivors. He also noted that most of Helene’s damage was caused by flooding is covered separately of the homeowners’ policies now being considered.
The process is likely to continue after early voting begins on October 17. Causey, a two-term Republican commissioner, is being challenged by Democrat Natasha Marcus, a state senator.
Marcus held a press conference outside the insurance department’s headquarters and criticized Causey for refusing to chair the hearing. He called it a “ridiculous neglect of one of his most important duties in this job.” She also lamented that any decision will be made after election day.
Causey said he is not handling the case in part because he is not a lawyer. State law allows him to choose someone else to preside over the hearing, which is a quasi-judicial proceeding.
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The story corrects the insurance professor’s name to David Marlett, not David Martlett.
