North Carolina Insured Drivers to See Rate Decrease of 16.1%

North Carolina Insurance Commissioner Jim Long signed an order requiring a 16.1 percent reduction in private passenger auto rates and a 11.7 percent reduction in motorcycle liability rates.

The decreases will become effective Jan. 1, 2009, according to Long.

“After listening to testimony from both sides during the rate hearings in July and August, I found that the rate bureau’s request for a 12.9 percent increase just wasn’t warranted,” said Long. “It’s the largest increase they’ve requested in almost 15 years. I was surprised by the request, especially since last year the bureau filed for no change.”

During the hearings, the department’s attorney argued that the market for auto insurance had not changed significantly since last year, when companies did not seek a rate increase.

State rate experts say the rate bureau employed faulty calculations when determining the proposed rate increase. For example, the bureau filing included claims arising from the North Carolina reinsurance facility — an entity which insures riskier drivers — even though bureau rates do not apply to those drivers. In fact, the reinsurance facility files separate rate proposals using its own claims data.

Long ultimately agreed with department experts that the bureau filing presented a skewed picture of the marketplace.

Under state law, the commissioner sets the maximum allowable rate that auto insurance companies can charge in North Carolina; companies can and regularly do offer discounts to their policyholders.

If the rate bureau chooses to appeal Long’s order, they may do so through the court system. Companies can then raise rates while awaiting the appeals decision, and the difference in the ordered rate and the implemented rate must be held in escrow. If the bureau loses its appeal, the escrowed money plus interest must be refunded to policyholders.

Since taking office, Long has consistently ruled for small or no rate increases and in many cases has ordered rate decreases. Combined, these rulings have potentially saved drivers an estimated $5.7 billion.

North Carolina currently has the 6th lowest auto insurance rates in the nation, according to Long.

Source: North Carolina Department of Insurance

Topics Trends Auto Pricing Trends Personal Auto North Carolina