N.C. DOI Scrutinizing Rate Bureau’s Request to Increase Auto Premiums

The request by the North Carolina Rate Bureau to increase auto insurance rates in North Carolina is being closely scrutinized by the North Carolina Department of Insurance according to Chrissy Pearson, a DOI spokeswoman.

“It’s the normal thing that happens every year around this time,” Pearson said. “But the normal process has a twist this year, with NCRB changing the way it made its calculations to its rate increase request.”

Pearson said DOI plans to review the request and if it doesn’t like the way the numbers add up, will try to negotiate a different rate increase, or even a decrease with NCRB. The rate increase request is partially attributable to NCRB, for the first time, including reinsurance in its calculations.

“Upon initial inspection, we believe this request may not be based on worsening experience — that is, more claims being paid out — but rather as the result of new methodology,” Sherri Hubbard, the department’s lead rate attorney for auto cases, said.

Since liability insurance is required to drive a car in North Carolina, insurance companies have to write policies for eligible drivers seeking coverage. Even if an insurance company deems a driver as a high risk, the company still has to write a policy.

But instead of providing a financial backstop for a high-risk driver’s policy in its usual way, insurance companies assign high-risk drivers to the reinsurance facility, a pool that gets its funding from all insurance companies.

The reinsurance facility, which tends to have higher losses, hasn’t been included in the rate request calculations until this year, Pearson said.

“That is a drastically different way of doing things,” said Pearson, who added that the department is “curious” about how the calculations will hold up under DOI scrutiny. “We will give this a good look,” she said. “We won’t jump to conclusions immediately.”

Topics Trends Auto Pricing Trends North Carolina