N.C. Bill Would Strip Insurance Chief’s Rate-Setting Power

North Carolina lawmakers are considering taking away the state insurance commissioner’s power to set rates for some policies, as industry groups complain the office leans toward consumers in rate disputes.

Under current law, the state insurance commissioner holds hearings on rate disputes and issues rulings that determine the maximum rates insurers can charge for automobile, homeowners and workers’ compensation policies.

A bill sponsored by Senate Majority Leader Tony Rand, D-Cumberland, calls for a superior court judge to hold hearings and rule on rate disputes.

The change would lead to higher rates for consumers, Insurance Commissioner Jim Long said. Long said he is required by law to act impartially in hearing rate disputes, and the insurance industry is pushing for the bill so it can raise rates.

But the commissioner is an elected official, meaning whoever holds the office is destined to be an “advocate for the consumer,” said Joe Stewart, executive director of the Insurance Federation of North Carolina.

The industry group asked Rand to file the bill and is seeking a House sponsor for similar legislation. The bill is “not about this particular commissioner,” Stewart said. “It’s about whoever sits in the commissioner’s seat.”

Rand said the measure would allow the commissioner to act as an advocate at the hearings before a judge. It also requires the commissioner to prove that the rate request sought by insurers is “excessive, inadequate, or unfairly discriminatory.”

Rand said he has no complaints about Long’s decisions: “I think this is just a better way to do it from now on.”

North Carolina’s automobile insurance rates were the nation’s fifth-lowest in 2005. Homeowners’ rates were 20th-lowest in 2004, the most recent annual data available, Long said. He didn’t have data on the ranking for workers’ compensation insurance rates.

Only a handful of states have a system like North Carolina’s, in which the N.C. Rate Bureau – which represents insurers – proposes adjustments to the maximum rates that companies can charge for the three types of insurance.

Insurance department staff review the proposal and negotiate with the Rate Bureau. If they cannot agree, the commissioner holds hearings and decides the rate. The ruling can be appealed by the Rate Bureau through the state court system.

Since he took office in 1985, Long has set rates below the amount the insurers sought. The Rate Bureau has appealed his decisions six times, but Long’s ruling has been upheld every time.

Information from: The News & Observer,
http://www.newsobserver.com