N.C. Insurance Commissioner Wayne Goodwin has called for a public hearing on a request to increase premiums for homeowners insurance across the state.
Goodwin’s move comes after the N.C. Rate Bureau, which represents the property insurance companies writing policies in North Carolina, is seeking a 17.7 percent (statewide average) increase in premiums for homeowners insurance. It submitted its filing Oct. 1.
The hearing, which is open to the public, is scheduled to begin at 10 a.m. June 3, 2013, at 430 N. Salisbury St. in Raleigh.
The hearing is more like a judicial proceeding than a public hearing held by a city council or a county’s board of commissioners. Goodwin would serve as the hearing officer. The only people who are allowed to speak at the public hearing are Department of Insurance witnesses and Rate Bureau witnesses.
“If the Rate Bureau wishes to appeal the Commissioner’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 too much,” reads the department’s website.
A public comment period on the rate filing was held from Oct. 3 through Oct. 19 to engage the public in the ratemaking process. 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 Oct. 17.
“We anticipated that a hearing would be called on the rate filing just given the information we saw and the concerns NC-20 raised on the rate filing, many of which are contained in the document, the order for the hearing. Many of the same arguments that NC-20 made as to why a hearing should be called were included in that,” said Willo Kelly, president of NC-20, a nonprofit that represents economic-development interests in the 20 counties under the Coastal Area Management Act.
“The Department of Insurance’s role is to represent the interests of the public. After an initial review of the filing and comments submitted by the public, Department experts believe the requested rate increases are not justified based on the data submitted,” reads a notice about the hearing on the department’s website.
The following concerns (taken from the website), 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.
The last time a hearing concerning a homeowners insurance rate filing was in 1993.