NCDOI Fines Builders Mutual for Repeat Violations in Commercial Auto

Builders Mutual Insurance and its subsidiary, Builders Premier, have agreed to pay a $39,000 penalty after a North Carolina market conduct examination again found issues with producer licensing, nonrenewals and subrogation recoveries.

The Raleigh-based Builders already has issued small refunds to policyholders, due to a rating error discovered in the examination, and plans to submit a corrective plan of action, the NC Department of Insurance said.

Most of the violations involved commercial auto coverage. The examination, covering much of 2021 and 2022, was a follow-up to a previous review, for 2016-2018, that found similar concerns.

The latest market conduct examination found:

• About 10% of producers examined were not properly appointed, a higher rate than the previous exam revealed.
• Some 2% of reviewed producers were not licensed in North Carolina.
• Sufficient proof of North Carolina residency was not obtained for 17 of the 50 policies selected for review.
• On 100% of the policies examined, the insurers did not maintain safeguards to identify misrepresentations by insureds regarding the places their vehicles were garaged. State law addresses rate evasion when applicants attempt to avoid higher rates in one territory by falsely declaring the covered vehicles are garaged in a lower-rated territory.
• A handful of policies were rated using incorrect territories, fleet classifications or rate modification factors.
• The carriers failed to give precise reasons for nonrenewals of some policies.
• The insurers had delays in reimbursing deductibles after subrogation recovery, in four claims. That’s a sharp improvement from the 19 of the 50 claims reviewed in the previous exam.

The DOI has completed three to eight market conduct examinations each year for the past five years, and fines one to two companies per year. This is the second fine reported this year. Earlier this month, the department fined two Auto Club Group subsidiaries, and the companies agreed to refund $2.6 million to policyholders.

Update: This article has been corrected to explain that the insurer did not maintain safeguards against policyholders representing where their vehicles were kept in garages, and to show the number of market conduct examinations completed by DOI each year.

Topics Auto Commercial Lines Business Insurance