rate hike rescheduled for July 25
Insurance Commissioner Wayne Goodwin announced this week that the
hearing on the rate increase to the dwelling fire and extended coverage
requested by the North Carolina Rate Bureau has been rescheduled.
The hearing had been scheduled for June 21.
The new date is Monday, July 25, in the Jim Long Hearing Room on the
third floor of the Dobbs Building, 430 N. Salisbury St., Raleigh.
The postponement comes after the North Carolina Rate Bureau—the
independent organization that represents all North Carolina property
insurance companies—notified The Department of Insurance (DOI) that it
needed to submit changes to its original filing.
The Rate Bureau indicated that the requested statewide average increase
for dwelling property policies will drop from 20.9 percent to
approximately 20.5 percent as a result of the changes.
Dwelling fire policies are different from traditional homeowner’s
insurance policies in that they offer fewer coverage options and are
sold to properties that would not qualify for a standard homeowner’s
policy. Dwelling fire policies are offered to non-owner occupied
residences, including rental properties, investment properties, and
other properties that are not occupied full-time by the property owner.
A dwelling fire policy does not typically include liability coverage.
Extended coverages would generally include coverage for damage to the
dwelling from wind, hail, fire, smoke, riot, civil commotion, and
aircraft and vehicle damage.
Goodwin will serve as hearing officer but will withhold any comment on
the filing, as he is required by law to remain unbiased. During the
hearing, Goodwin will hear from experts from the Department of
Insurance and the Rate Bureau and decide what rate change, if any, is
The Department of Insurance’s role is to represent the interests of the
public. DOI has retained independent, experienced experts who will
testify during the hearing.
After initial review of the filing, department experts believe the
requested rate increase is not justified based on the data submitted.
The following concerns, among others, may be raised at the hearing:
Old data: In the ratemaking process, data typically runs two years
behind the date of the rate filing. The filing is based on data from
2007; however, 2008 and 2009 data were available at the time this
filing was compiled.
Risk factors: The filing includes various risk factors used to
calculate the indicated rate changes. The Rate Bureau claims these
factors (such as the net cost of reinsurance and compensation for
assessment risk) are a necessary cost of doing business in North
Carolina. The concern is that the factors do not appear to be justified
and result in an increase in rates.
Profit methodology: The Rate Bureau uses a methodology that is not
allowed in North Carolina and has been successfully challenged in the
2001 auto insurance case, which was decided by the N.C. Supreme Court.
This methodology results in excessive profit factors of 9.5 percent.
Deviations: The Rate Bureau includes a factor for deviations (discounts
that some insurers give some of their policyholders) in the filing
that, in effect, charges discounts back to consumers. The inclusion of
a specific factor for deviations has been previously disallowed
numerous times in auto filings litigated in the N.C. Supreme Court.
Hurricane Model: The hurricane losses for extended coverage are derived
using a hurricane model that does not appear to be adequately
documented or justified.
The Revised Dwelling Filing is available for public review.
If the Rate Bureau wishes to appeal Goodwin’s decision, it can do so
through the court system, and companies can raise rates while awaiting
an appeals decision. The difference in the ordered rate and the
implemented rate must be held in escrow. If the Rate Bureau loses its
appeal, the escrowed money must be refunded to policyholders who paid