N.C. Rate Bureau Appeals Commissioner’s Order

November 6, 2002

The North Carolina Rate Bureau (NCRB)’s recent announcement that it is filing an appeal with the North Carolina courts to overturn Insurance Commissioner Jim Long’s order for auto rate reductions is necessary to retain viable rates in North Carolina, according to the National Association of Independent Insurers (NAII).

“Although this situation may be painful in the short run, the clash between the NCRB and the Commissioner could provide a much-needed catalyst for change in the North Carolina insurance regulatory system,” NAII counsel Greg LaCost said.

The controversy began last month when Commissioner Long ordered insurers writing to the state to reduce their auto premiums by 17.8 percent, a move that would drop rates more than 21 percent below 1996 levels, according to the NCRB. Until the issue is resolved, the NCRB will implement a 5.9 percent rate increase, effective January 27, 2003.

“Commissioner Long’s decision appears to disregard the current state of affairs for the insurance market: increased medical costs, continued insurance fraud losses, losses or decreases in investments by insurance companies, higher jury awards, and an increase on claims and lawsuits,” LaCost noted.

“North Carolina’s overregulated insurance market is ripe for reform, and we’re hoping this situation spurs some action,” LaCost noted. “The fact that the state’s reinsurance facility is the biggest in the country, and is being subsidized by every driver in North Carolina, is evidence that the current system doesn’t work.”

La Cost pointed to South Carolina’s adoption of a flex band system in 1999, which caused rates to decline, increased the number of insurers writing business in the state, and shrunk its residual market. “A similar system would work wonders in North Carolina,” he added.

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