Insurance Commissioner calls for a Public Hearing

On Oct. 23rd the North Carolina Department of Insurance announced that they have rejected the homeowners insurance increases proposed by the NC Rate Bureau and called for a formal public hearing. The hearing, which is open to the public, is scheduled to begin on June 3, 2013 at 10:00am at 430 N. Salisbury St. in Raleigh.

NCDOI stated that based upon their Initial review of the filing, and comments submitted by the public, Department experts believe the requested rate increase raises concerns and are not justified based on the data submitted.   Read the full of notice of hearing.
As indicated in past updates Commissioner Goodwin will serve as the hearing officer and listen to experts from the Department of Insurance and the Rate Bureau to decide what rate changes, if any, are warranted.  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 2005 to 2009; however, data from at least as recently as 2010 was 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 a substantial 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 10.5 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 are derived using a hurricane model that does not appear to be adequately documented or justified.
    We will have you know that the Department of Insurance received approximately 8,800 emailed or mailed comments, and approximately 35 people made comments in-person during a public comment session held on Oct. 17.

BASE would like to Thank all of our members for all their help, by participating in the public comment session on Oct. 17th and by providing written comments to NCDOI in reference to the proposed rate hike.

Leave a Reply

Your email address will not be published. Required fields are marked *