Rep. Spear seeking to delay increase in home insurance rates

Published 1:44 am Thursday, February 5, 2009

By Staff
Coastal counties fighting against significant hikes
Contributing Editor
State Rep. Timothy Spear is sponsoring a bill that would block insurance companies that provide homeowners insurance from raising rates in coastal areas.
House Bill 26, filed by Spear last week, also would impose a moratorium on insurance-rate increases for any permanent home valued at $150,000 or less. On Monday, after it passed its first reading, the bill was referred to the Committee on Rules, Calendar and Operations of the House. The moratorium would expire May 1, 2011.
If it becomes law, the bill, in effect, would be retroactive to Feb. 1, when certain surcharge increases took effect. The bill contains language the requires those premiums be refunded by insurers to the homeowners who paid them, Spear said. Co-sponsors of the bill are Reps. Alice Graham Underhill, W. Robert Grady, Carolyn Justice, Pat McElraft and Bonner Stiller.
Existing policies permit the state-run insurance plan for coastal communities, known as the Beach Plan, to charge homeowners in 18 coastal counties 25 percent more than the insurance industry’s base rate for a homeowner’s policy, according to Spear.
His bill would prohibit that surcharge increase and a 15-percent surcharge for windstorm and hail coverage from taking effect. It also would block a recommended change in the deductible allowed under the plan, which would increase to 2 percent of the insured value of the house.
Spear said he introduced the bill “to give us an opportunity to work through this current economic situation we find ourselves in.” The moratorium would give coastal homeowners two years to improve their fiscal health before the increases would kick in, Spear said.
Hyde County Manager Carl Classen said the increases could not come at a worse time — during a recession.
The Beach Plan was established in 1969 to serve as a state fund to provide property insurance coverage for coastal homeowners on barrier islands who could not acquire coverage for windstorm damage from private insurers, Classen explained. The plan has been expanded to include all 18 coastal counties.
Insurers contend that for years the Beach Plan has provided broad coverage and low deductibles at rates that are significantly below what they believe are needed to cover their risks in providing such coverage, Classen explained.
Last month before the General Assembly reconvened, a legislative study commission recommended the Beach Plan reduce its maximum property policy coverage to relieve its potential liability in the wake of a massive hurricane. The panel also proposed limiting how much insurance companies would have to pay should the Beach Plan not have enough money to cover all claims, but no limit was established.
In January, the Hyde County Board of Commissioners voiced its opposition to the rate increases. Washington and Dare counties also oppose the increases. The Beaufort County Board of Commissioners, during its meeting Monday, discussed the proposed increases but took no action other than to instruct County Manager Paul Spruill to monitor activities related to the increases.
When asked to comment on Spear’s bill, Lee Dunn, a spokesman for the North Carolina Joint Underwriting Association/North Carolina Insurance Underwriting Association, said that “due to litigation, we are not discussing that issue.” The group underwrites the Beach Plan.
In December, a settlement agreement between the N.C. Department of Insurance and the insurance industry established specific rate increases for homeowners’ insurance in specific areas of the state. Under the settlement, those increases would take effect May 1. Homeowners along the state’s Atlantic coast would experience the largest increases.
The settlement allows an overall statewide average increase of 4.05 percent in rate, lower than the 19.5 percent (average) increase originally proposed by the North Carolina Rate Bureau. The bureau represents all of the homeowners insurance companies doing business in the state.
Homeowners in Beaufort and Washington counties would pay 6.5 percent more, with homeowners in Hyde County who live on the mainland paying 22 percent more, according to the N.C. Department of Insurance. A homeowner on Hyde County’s Ocracoke Island would pay 6.5 percent more.
For a homeowner in either Beaufort County or Washington County with a house valued at $150,000 and insured under the HO-3 policy, a year’s coverage would cost $1,327. For a homeowner with a $150,000 home on Hyde County’s mainland, a year’s coverage would cost $1,519. For a homeowner on Ocracoke Island, the yearly cost for coverage would be $2,122.