In late 2008, the outgoing Commissioner of Insurance for North Carolina approved significant changes to both basic homeowners insurance rates and the rates which apply to the mandatory wind and hail coverage (called the Beach Plan) coastal homeowners must carry. For some coastal citizens these increases meant a 30% increase in basic homeowners insurance in addition to significant Beach Plan increases including a proposed 2% deductible and highly increased surcharges.

Unchallenged, these impacts would have been tremendously detrimental to our coastal communities and eastern North Carolina as a whole. To mitigate the impacts the increases would have caused, BASE worked with our local governments, state lawmakers, citizens, industry partners and media to illuminate the issue and lead the effort for reform. To keep the issue at the forefront, BASE was frequently sourced in print and radio, appeared on WILM's Byline:Wilmington, served on a coastal insurance panel at the 2009 Shape of the Coast meeting and even garnered a specific mention in the August 12, 2009 Wilmington StarNews editorial for our efforts. BASE has been working on the homeowners insurance for a number of years but served as the primary lobbyist on behalf of the interests of all in the 20 coastal counties during this latest discussion. However, without the support of our legislative leaders, local governments and our members, e ven a small amount of change would have been impossible.

   
                    PART ONE                                                        PART TWO                                                          PART THREE
BASE Governmental Affairs Director Tyler Newman discusses Homeowners Insurance with WILM's Donn Ansell on Byline: Wilmington

Homeowners Insurance Rate Increases: 

• Effective May 1, 2009, 63 Counties in North Carolina saw homeowners rates increase
  
• Rate Increases range from 2% to nearly 30%
• Mainland New Hanover, Brunswick, Pender, Onslow and Carteret Counties homeowner's insurance rates will increase roughly 30% and 17.5% for the barrier islands.
• Action approved by outgoing Insurance Commissioner Jim Long on December 18, 2008

Perspective:
Coastal homeowners got increases every rate cycle since 1992--including 2005 and 2007 and 2009.
In comparison, Charlotte area rates remain unchanged since 1992.

 Myths and Misconceptions:

• Eastern NC is being subsidized by the remainder of the state, “everyone in Eastern NC lives in front row beach mansions"
• Reality: 7 of the 18 Coastal Counties are Tier I Counties, among the 40 most economically distressed in NC
• Nine of the Counties have poverty rates above the statewide average and income below the statewide average
• 57% of properties insured by the Beach Plan have an insured value for building /contents of $300,000 or less
• What if we have a Katrina in NC? Reality:  Katrina’s losses were primarily flood related (not at issue: flood insurance)
• What is the Actual History vs. What Does the Modeling “Predict”
• What about stronger building codes? No codes during Hurricane Hazel
• HURRICANES ARE STATEWIDE: Inland Impact of Hugo, Fran
• 1851-2004: NC had 6 category 3+ storms... only 1 category 4, 0 category 5

 Need statewide equity in homeowners rates

 Need affordability and availability for consumers

 Need stable and predictable environment to encourage companies to write policies statewide

The lawsuit that was filed contesting the Beach Plan increased surcharge and increased deductible is before the Court of Appeals. In the lower court, on March 20, 2009, Wake County Superior Court Judge William Pittman issued a stay finding that the Commissioner did not act according to law, The implementation of the Beach Plan surcharge and deductible increases are stayed while the appeal is being heard.  It is unknown how long it will take the Court of Appeals to rule but generally it takes months.

The lawsuit that was filed contesting the homeowners rate increases is also before the Court of Appeals.  A different judge in the lower court ruled against, saying that the parties did not have standing to sue and did not grant a stay of the rate increase.  This decision was appealed to the Court of Appeals—a case which was heard in January 2010.  As such, the rate increase approved by the Commissioner and effective on May 1 are in place.

BASE served as the lobbying force for the 20 coastal counties as the homeowners insurance issue was deliberated by the North Carolina General Assembly in 2009. While the legislation focused on the Beach Plan and not homeowners insurance as a whole, the result was tremendously important to all North Carolina citizens. Without a financially viable Beach Plan, insurers would be hesitant to write policies throughout North Carolina, due to the unknown risk. So, what did we accomplish?

HB 1305 Omnibus Beach Plan Changes (Rep. Holliman)

 PASSED BY NC GENERAL ASSEMBLY, Signed into law by Governor Perdue on Wednesday August 26, 2009

• Most critically, ensures financial stability of the Beach Plan (retaining surplus in the Plan--$41 million out in 2006)
• In the event of a loss to the Beach Plan, creates $1B assessment to Insurance Companies before statewide assessments (effectively $3.4 Billion damages before statewide impact). Previously this amount was a critical unknown which impacted their ability to quantify their risk in NC.
• Protects policyholders statewide by providing financial stability for the plan—which should encourage insurance companies to stay in North Carolina and continue to write policies statewide
• Changes Beach Plan name to “Coastal Property Insurance Pool”
• Legislatively sets surcharges at 5% (wind) and 15% (full peril)
• Establishes 1% named storm deductible
• Removes the proposed requirement for flood insurance (House amendment) and removes surcharges for commercial and dwelling policies (Senate amendment)
• Additional positive provisions in the bill: creates an installment payment option, provides mitigation credits for voluntary measures (storm shutters, roof tie-downs, etc.) and creates a grant program.

Overall, increased transparency and public input of Beach Plan activities and actions of the Rate Bureau.

Downside of HB 1305:

• Reduces residential coverage limits in Beach Plan to $750,000 (from $1.5 million)
• Reduces contents coverage from 70% to 40% (unintended consequences?)

 HB 1305 calls for Legislative Research Commission to study:

• Need for changes in the Beach Plan Board
• Adequacy of public participation in the filing of rates by the NC Rate Bureau
• Examine feasibility of establishing a permanent public advocacy staff to participate and advocate in rate-making proceedings (Utility Commission-style?)
• Interim report due for 2010 session, final report due for 2011 General Assembly

• Continued pursuit of statewide equity in homeowners insurance rates
• Is there an opportunity to form a multi-state wind pool? (SC, GA, VA)
• Continue to enjoy enhanced communication with Commissioner Goodwin regarding the issue