One of North Carolina’s largest homeowners’ insurers says it is considering canceling the coverage of up to 70,000 homeowners unless the state Legislature makes changes allowing it to charge higher rates.
North Carolina Farm Bureau Executive Vice President Steve Carroll recently told state lawmakers that the insurer may have to cancel the policies in order to reduce its exposure and make its homeowners’ book of business profitable.
He said that the insurer needs more leeway to enact higher rates, especially given the rising cost of reinsurance, which he said is expected to double as a result of the losses incurred from Hurricane Irene and the spate of tornadoes that touched down in the state last spring.
Carroll estimated that 40 percent of the insurer’s premiums will go towards purchasing reinsurance next year.
“To continue to write property insurance the way we have in North Carolina, we have to have higher rates,” said Carroll.
The North Carolina Rating Bureau negotiates rates on behalf of the 621 property insurers in the state. The proposed rates are then approved, disapproved or modified by the insurance commissioner.
Speaking before a joint legislative Committee on Property Insurance Rate Making, Farm Bureau’s Carroll said the current regulatory structure is workable. However, he said, more emphasis needs to be placed on reinsurance costs and the use of computer models when developing loss estimates.
The Raleigh, North Carolina based-insurer is already making other underwriting changes that could leave an additional 28,000 homeowners scrambling for coverage elsewhere.
Effective January 1, the insurer is following the trend of other carriers to cancel homeowners if they insure their automobiles through another company. The insurer is also canceling homeowners who filed a claim within the last five years.
If the insurer follows through and drops the 70,000 homeowners in addition to the 28,000 policies it is already non-renewing, it would lose about 20 percent of its homeowners’ book of business.
According to the department of insurance, the North Carolina Farm Bureau is the third largest homeowners’ insurer in the state with a 13.9 percent market share.