North Carolina homeowners insurers are seeking an average 19.5 percent statewide rate hike which, if approved, would be the first rate hike since 2006.
The proposal, being finalized this week by the North Carolina Rate Bureau for submission to the state insurance department next week, includes rate increases of 32 percent to 70 percent for residents in the Outer Banks and costal counties.
Residents in the rest of the state would see rates go up from 1 percent to 22.5 percent on average under the proposal.
According to Tim Lucas, personal lines manager for the NCRB, losses, expenses and hurricane models are the driving factors behind the rate filing on behalf of private insurers.
The filing is being made while state officials are weighing what to do about the state’s under-funded residual market, known as the Beach Plan, which provides insurance for homeowners unable to get it in the private market. The NCRB filing does not address the Beach Plan’s funding.
The NCRB does, however, include a new provision to recognize that private insurers may have to provide an extra layer of reinsurance beyond the first layer in the event of a major catastrophe.
Lucas said the NCRB is obligated to file what its analysts think are actuarial sound rates to cover future claims and expenses. But the filing and all of its provisions are subject to negotiation with the North Carolina Department of Insurance and outgoing Insurance Commissioner Jim Long.
The NCRB filing for the state’s $1.4 billion private homeowners insurance market has a recommended effective date of May 1.
The Beach Plan’s rate structure is itself in for some changes. According to Kristin Milam, NCDOI director of public information, last month the department approved some rate hikes and higher deductibles that will begin in February. For homeowners policies in the residual market, insurers can now charge a differential of from 15 to 25 percent above the approved rates. For wind only policies, the new surcharge is from 5 to 15 percent above approved rates.
Also, the minimum deductible on Beach Plan wind policies was raised from one to two percent of the damaged property’s insured value.
Finally, the NCDOI raised from $750 million to $1.1 billion the amount of surplus the Beach Plan can retain.
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