New Bills Would Raise Insurance Rates, Says NC Regulator

North Carolina Insurance Commissioner Wayne Goodwin is accusing car insurance companies of backing legislative changes to the state’s regulatory structure simply to be able to raise rates on motorists and increase profits.

Goodwin currently oversees a regulation system that is unlike any other regulatory structure in the nation.

In the state, all car insurers file their rating plans with the North Carolina Rate Bureau (NCRB), which proposes base-rate premium-calculation formulas to the commissioner for approval on behalf of all companies operating in the state. The commissioner can put a cap on rates, and companies can only adjust their rates by offering discounts.

North Carolina Insurance Commissioner Wayne Goodwin

North Carolina Insurance Commissioner Wayne Goodwin addressed the legislation in a video message earlier this week.

Many out-of-state and North Carolina auto insurance companies are contending that this process is too restrictive and needs to be changed. Three bills have been introduced this legislative session that would do just that by cutting the NCRB out of the equation and giving insurers more flexibility when setting premiums.

But Goodwin has embarked on a media campaign alleging that the bills are being pushed by insurers simply out for their own interests.

Goodwin, in a video message distributed earlier this week, said the current structure “strikes a necessary balance between the consumers’ interest and the insurance companies’ interest.”

“Auto insurers make enough money to keep doing business here profitably, and drivers have relatively low rates,” Goodwin said.

A number of studies add credence to that contention, with at least three showing that the state’s average rates are among the lowest in the country. Goodwin attributes this to his ability to cap rates, and says rates will go up if the regulation system is restructured.

According to the Insurance Information Institute, the low cap on rates established by the commissioner have at least partly contributed to the high rate of drivers who obtain coverage through the state’s residual market (the market of last resort for drivers whom insurers have denied coverage based on risk).

Since the rates are kept so low, a greater proportion of drivers appear to be less profitable to insurers, so prospective policyholders are more frequently directed to the state’s high risk pool, which is partially subsidized by other policyholders.

Goodwin’s position, though, is that the per-person subsidy is kept low and that all drivers benefit on the whole from the current structure.

About John Pirro
John Pirro is a licensed fire and casualty insurance agent specializing in various aspects of the auto insurance industry. He worked in the auto body repair industry before taking a reporting position at Online Auto Insurance News.

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