Insurance Commissioner Jim Long has announced plans for a hearing on auto insurance rates in September.
This announcement comes after the North Carolina Rate Bureau, an independent organization that represents all auto insurance companies in the state, filed for an 11.5 percent increase in rates on Feb. 1. Department officials reviewed the rate filing and determined that the requested increase was not justified. State law requires Commissioner Long to serve as hearing officer during a hearing to decide the matter. Auto rate hearings typically encompass three to four weeks of testimony from both sides.
“We are troubled by the Bureau’s request to increase rates so severely,” said Sherri Hubbard, the department’s lead rate attorney on this case. “Last year we were able to keep rates stable, and the year before that we had a decrease. Why do North Carolinians need such a dramatic increase after years of low rates from financially healthy companies?”
In 2004, the department negotiated a zero percent change in rates after the Bureau initially requested a 12.3 percent increase; in 2003, a 15 percent decrease was agreed upon after an initial request of a 10 percent decrease.
Commissioner Long will decide what rate change, if any, is warranted during the hearing. If the Bureau wishes to appeal his 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 Bureau loses its appeal, the escrowed money must be refunded to policyholders who paid too much.
Last year, the resolution of two such appealed cases resulted in an auto rate refund valued at several hundred million dollars. In October and November 2004, North Carolina drivers received refund checks, often for hundreds of dollars. The two cases were from 2001 and 2002; the 2001 case was decided in North Carolina Supreme Court, which ruled in Long’s favor. The 2002 case was settled out of court quickly after that.
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