Cape Fear Coalition of Concerned Citizens

NC Property Insurance: Sub-Committee Formed by Legislative Research Commission

2011-11-21T14:50:00.006-05:00

The Legislative Research Commission has formed a sub-committee (Committee) to study the rate-making process for property insurance in North Carolina. The Committee will look at:

The adequacy of citizen input in property rate-making
The possibility of replacing the NC Rate Bureau with a market-based system
Legislative oversight of the Rate Bureau and the Beach Plan
The duties of the Commissioner of Insurance pertaining to protection of policy holders against excessive, inadequate or unfairly discriminatory rates
The adequacy of the review process afforded by statute to persons affected by decisions by the Rate Bureau
The use of modeling in the rate-setting process

The Committee will meet four times before the May 2012 short session in Raleigh. The second meeting (public comment) will be December 1, 2011.

Property Insurance Bills Makes It Into House Study Bill

2011-06-17T11:39:00.005-04:00

The vote on House Bill 773 which includes House Bill 820 and Senate Bill 716 that establishes Commissions to study both the Beach Plan and the overall rate-making process for property insurance in North Carolina has been delayed until July 13, 2011. When passed, the Commissions will submit an interim report to the 2012 Regular Session of the 2011 General Assembly prior to its reconvening and will make a final report to the 2013 Regular Session of the General Assembly prior to its convening. The reports will contain the Commission's findings, recommendations, legislative proposals, and cost analyses.

This is great news for coastal homeowners!

Dwelling Filing Rate Hearing Rescheduled by NCDOI

2011-06-08T15:46:00.003-04:00

The NCDOI hearing will begin July 25, 2011, at 10 a.m. It will take place in the Jim Long Hearing Room on the third floor of the Dobbs Building, 430 N. Salisbury St., Raleigh. The postponement comes after the North Carolina Rate Bureau—the independent organization that represents all North Carolina property insurance companies—notified DOI that it needed to submit changes to its original filing. To learn more on this, please Click Here.

Insurance Commissioner Wayne Goodwin postpones public hearing originally set for June 21 to discuss the proposed increases on dwelling fire policies

2011-06-03T11:04:00.003-04:00

Back in January of this year, the North Carolina Rate Bureau (NCRB), who represents the property insurance companies writing business in the state, requested an overall statewide average increase of 20.9 percent for 2011 for dwelling fire and extended (wind, hail, fire, smoke, riot, civil commotion, and aircraft and vehicle damage) coverage. The filing was reviewed by Department officials to determine what, if any, rate adjustments are warranted. In response, Commissioner Goodwin ordered a public comment session from January 4-31, 2011. During the public comment period, Department of Insurance staff received 865 written comments and heard from 11 speakers at a public comment session held on Jan. 24. These comments are being treated as items of interest by staff during their review of the filing; all comments have also been forwarded to the NCRB.

Dwelling fire policies are different from traditional homeowners insurance policies in that they offer fewer coverage options. These policies, which consist of one-to-four units, are offered to non-owner occupied residences including rental properties, investment properties and other properties that are not occupied full-time by the property owner.

On Monday, February 21, the state Department of Insurance announced that it is opposing premium hikes on dwelling policies requested by insurers, stating that the industry’s request to raise rates an average of 20.9 percent isn't justified based on the data submitted. Insurance Commissioner Wayne Goodwin has postponed a public hearing originally set for June 21, 2011 to discuss the proposed increases. When the hearing is held, experts from the Insurance Department and the NCRB will present evidence to support their positions; the hearing is not open to public comment. Commissioner Goodwin, after hearing all the evidence, will decide if a rate increase is warranted.

Two More Bills Introduced Regarding Property Insurance!

2011-04-25T20:13:00.010-04:00

A bill has been introduced in the House regarding coastal property insurance rates sponsored by Representatives Hamilton, McElraft, Justice and Rapp. House Bill 820 establishes a joint legislative study commission to study the North Carolina Joint Underwriting Association/North Carolina Insurance Underwriting Association’s (a.k.a. The Beach Plan) rate making process for coastal insurance.

Additionally, Senator Brown introduced Senate Bill 716 which establishes a joint legislative study commission to study the property insurance rate-making process across the state of North Carolina.

CFC3 will keep you posted as these bills move through the General Assembly.

We Have a Bill!

2011-03-24T15:54:00.005-04:00

After months of drafting, we finally have an insurance reform bill. Senator Thom Goolsby introduced Senate Bill 395 which creates a Citizens’ Property Insurance Board to protect the interests of NC citizens in the property insurance rate setting process. The Bill is a significant first step in redefining the rate making process. Thank you Senator Goolsby!

The Bill could not have come at a better time. On March 10^th 2011, the NC Supreme Court denied the request for discretionary review (will not hear the case) in the Dare County lawsuit challenging the NC Insurance Commissioner's decision to raise coastal rates in the 2008 Homeowner's Insurance Rate Filing. All legal (judicial) avenues to challenge the NC Insurance Commissioner’s decision have been exhausted. The only solution now is legislative.

Dept. of Insurance Opposes Dwelling Rate Hikes

2011-02-25T16:01:00.005-05:00

The state Department of Insurance announced on Monday, February
21, that it is opposing premium hikes on dwelling policies requested
by insurers, stating that the industry’s request to raise rates an
average of 20.9 percent isn't justified based on the data submitted.
Insurance Commissioner Wayne Goodwin has scheduled a public
hearing for June 21 to discuss the proposed increases. At that hearing,
experts from the Insurance Department and the N.C. Rate Bureau,
which filed the rate hike request on behalf of the industry, will present
evidence. Commissioner Goodwin, after hearing all the evidence, will
decide if a rate increase is warranted.

NCDOI Holds Public Comment Session

2011-01-26T10:19:00.008-05:00

The NCDOI held a public comment session on Monday, January 24th on the proposed increases in dwelling fire and extended coverage on non-owner occupied properties consisting of four or less units. The properties most affected will be rental properties, investment properties and other properties that are not occupied full-time by the property owner.

The proposed increase in insurance rates will trickle down to renters in a time when home values are down and foreclosures are up. In an already depressed market with record number foreclosures, the only option for many people is renting (this situation will hit our military markets particularly hard as our service men and women are frequently relocating).

With tourism a large part of the NC economy (especially the coast), NC will be less competitive with other similar markets and will lose sales and occupancy taxes that the coast depends most heavily.

The wide geographic discrepancy of the proposed rate increases do not coincide with the actuarial data indicating that the location of most claims paid by the insurance companies are outside the coastal areas.

While the average statewide dwelling rate increase is 20.9% in the rate filing, the proposed increase for the coastal areas is as high as 25% (with some areas around the state as low as 7.8%). Most of the proposed increase are under the “Extended Coverage” which includes windstorm and hail damage. This again shows an extreme inequity between the coast and the rest of the state.
The proposed increases will negatively impact the entire housing market further deterring market recovery.

Insurance Rates Increase Once Again

2011-01-07T15:19:00.007-05:00

On January 4, 2011, the N.C Department of Insurance (DOI) issued a news release stating that Insurers (insurance companies) requested a 20.9 % (state average) rate hike for dwelling property policies. This increase is for “combined policies,” (combination of dwelling fire and extended coverage) offered to non-owner occupied residences including rental properties, investment properties and other properties that are not occupied full-time by the property owner (most policies purchased under this plan are combined policies and not exclusively fire or extended coverage). But for the coastal counties, the DOI significantly increased the extended coverage (wind and hail) which contributed to a rate increase of 25% (capped).

Click Here to see the Combined Territorial Rate Level Changes Chart noting that New Hanover, Brunswick and Pender Counties fall under territory 8 (barrier islands) and territory 52 (inland).

This increase will not affect homeowners who live in their homes and were subjected to the increases in 2009.

There is going to be a public comment session on January 24, 2011 from 9:30 a.m. to noon in Room 3009 in the Dobbs Building located at 430 N. Salisbury Street in Raleigh. Or you can submit written comments by fax to 919-733-4264 or by mail: NCDOI, Attn: Bob Mack, Property & Casualty Division, 1201 Mail Service Center, Raleigh, NC 27699-1201.

CFC3 will be attending the public comment session on January 24, 2011.

CFC3 Drafting Legislation for General Assembly on Insurance Rates

2011-01-07T11:42:00.006-05:00

On November 2, 2010, the North Carolina Court of Appeals held that the Petitioners (the eastern counties) do not have the right to seek judicial review of the “consent order” (the 2008 Decision raising homeowner insurance rates) because they (the Petitioners) did not participate in the “proceedings” before the Commissioner during the pendency of the rate filing.

In other words, because the homeowners were not part of the proceedings (negotiations) when they took place between the Commissioner, the Department of Insurance and the Rate Bureau, they (the homeowners, through their counties) cannot challenge the decision.

However, the Court did state that “entities concerned about the level of insurance rates they are required to pay …with which they are dissatisfied is a matter for the General Assembly and not the judicial branch.” With this, CFC3 is drafting legislation to give to our elected officials in the upcoming 2011 session.

Updated NC Coastal Insurance Presentation

2010-05-26T16:21:00.001-04:00

NC Coastal Insurance Presentation

View more presentations from kriely.

N.C. Court of Appeals rules on first set of oral arguments

2010-04-26T15:34:00.003-04:00

On April 20, 2010, the North Carolina Court of Appeals dismissed one of three cases regarding increases in homeowner’s insurance rates (approved in 2008 by the North Carolina Department of Insurance) because of lack of subject matter jurisdiction.

This decision came after the N. C. Court of Appeals (Judges Calabria, Geer and Stephens) heard the first set of oral arguments on January 14, 2010 (under N.C. Gen. Stat. § 58-2-80) in the case of Dare County et al v. N.C. Department of Insurance and the N.C. Rate Bureau.

On April 16th, 2010, the N.C. Court of Appeals (Judges Bryant, Elmore and Ervin) heard the second set of oral arguments (under N.C. Gen. Stat. § 58-2-75) in the case of Dare County et al v. N.C. Department of Insurance and the N.C. Rate Bureau and CFC3 is waiting anxiously for this ruling.

It is the outcome of the latter set of oral arguments that the attorneys for the case and CFC3 believe hold the most impact on the future of coastal homeowner insurance rates.

Click here to read the Opinion.

N.C. Court of Appeals Set to Hear Oral Arguments in Case Against Insurance Department

2010-01-11T15:35:00.004-05:00

On Thursday, January 14, 2010, the N.C. Court of Appeals will hear oral arguments in the case of Dare County et. al v. NC Department of Insurance regarding the December 18, 2008 Order where the DOI, at the request of the Rate Bureau, raised coastal insurance rates by as much as 30%.

The questions before the court are:
1. Whether the Commissioner’s decision, made without notice or a hearing, was made in excess of the Commissioner’s statutory authority, upon unlawful proceedings, and upon improper procedure as required by statute.
2. Whether computer models can be used to support the Commissioner’s decision.
3. Whether the Commissioner improperly approved rate increases that were arbitrary, excessive, and unreasonable based upon historical actuarial data in the coastal territories.
4. Whether the Commissioner’s decision was made upon improper procedure and without the actuarial analysis required by statute.

Please check back here for regular updates on the hearing as well as any outcomes.

NH County Passes Resolution Supporting CFC3!

2009-09-11T13:45:00.003-04:00

Special thanks to the New Hanover County Commissioners for passing a Resolution in support of CFC3 Tuesday night! Click here to read the Resolution.

HB 1305 In a Nutshell

2009-09-04T11:28:00.009-04:00

Now that HB 1305 has been signed into law, what does it mean for homeowners in the Cape Fear Region? In a nutshell:

Before the 2008 decision to increase deductibles and surcharges under the Beach Plan:

• Average wind and hail coverage on a $150,000 house was approximately $925

• This included a 5% surcharge for wind and hail policies and a 15% surcharge for full peril policies under the Beach Plan

• Deductible was variable depending on policy

If the 2008 ordered increases to the Beach Plan were to have taken effect:

• Average wind and hail coverage on a $150,000 house would be approximately $1390

• Includes the Rate Bureau increases of 17.5% (barrier islands) and 29.8% (inland coastal) and the Beach Plan’s requested surcharge increase from 5% to 15% for wind and hail and 15% to 25% for full peril

• Deductible would have been 2% house value per occurrence

After House Bill 1305 was signed into law:

• Average wind and hail coverage on a $150,000 house is now approximately $1,295 (with most of the increase coming from the Rate Bureau’s increases)

• Kept the Beach Plan surcharge at 5% for wind and hail instead of the requested 15% and 15% for full peril instead of the requested 25%

• Changed the deductible to 1% house value per named storm as opposed to 2% house value per occurrence

• Allows policyholders to receive credits for mitigation and construction features

• Property owners can now make installment payments as opposed to full yearly payment up front

Overall, a positive change to the area as far as the Beach Plan is concerned but more work needs to be done especially to the overall rate-making process within the Rate Bureau. The majority of the increase in the rates is from the Rate Bureau and not the Beach Plan. Next session CFC3 will be actively involved in lobbying the Legislature for more changes to insure fairness in coastal homeowner insurance rates.

Governor Perdue Signs HB 1305 into Law!

2009-08-27T16:16:00.003-04:00

On Wednesday, August 26, 2009, Governor Perdue signed into law (SL-2009-472) House Bill 1305-the Beach Plan changes. Even though this represents a positive first step towards fairness in coastal homeowner insurance rates, CFC3 will keep on fighting for homeowners interests in the Cape Fear Region. Keep checking back with us for new developments.

HB 1305 Passes both House and Senate

2009-08-07T11:11:00.007-04:00

Yesterday, House Bill 1305 passed the House and Senate and will be presented to the Governor for signature.

HB 1305:

Requires the accumulated surplus (excess funds) of the Beach Plan be retained each year thus allowing the reserves to grow.
Locks the surcharges in at five percent (5%) for wind and hail coverage and fifteen percent (15%) for full homeowners policies (which are the amounts of the current surcharges). The Beach Plan had recently increased these surcharges to fifteen percent (15%) and twenty-five percent (25%), respectively. And unlike prior law, the Beach Plan cannot increase these surcharges without an act of the General Assembly.
Affirms that there will be no surcharges on dwelling or commercial policies.
Requires the higher Beach Plan deductible only apply if there is a named storm event- this deductible was lowered from the requested two percent (2%) to one percent (1%).
Added a provision allowing policyholders to receive credits for "the presence of mitigation and construction features" which now applies to both the Beach Plan and the voluntary market. Under the House version of the bill, these credits would have only applied to the Beach Plan.
Added language that beginning on May 1, 2010, the Beach Plan is required to file an installment plan for premium payments with the Commissioner of Insurance. Property owners were previously unable to make installment payments and instead were required to pay the full yearly premium up front.
Changed the contents coverage to forty percent (40%) of the replacement value of the structure (from seventy percent (70%)) and requires a decrease in premium that corresponds with the decreased contents coverage.
Added a Catastrophe Recovery Charge that in the event losses to the Beach Plan exceed available surplus, reinsurance and other funding sources, the Beach Plan is authorized to assess member companies up to $1 billion. Once the Beach Plan determines that all participating companies have paid the assessment, subject to the verification from the Commissioner of Insurance, the companies may charge a "catastrophe recovery charge" not to exceed ten percent (10%) of the annual policy premium on policies written statewide.
Lowered the maximum coverage limit for homeowners and dwelling policies from $1,500,000 to $750,000.
Directs the Legislative Research Commission to study all aspects of the Beach Plan's operation and the insurance ratemaking process by requiring annual audits of the Beach Plan. In addition, the Plan will be required to fulfill any requests for information that it receives from the public.
Proposes that whenever the Rate Bureau files for an increase in insurance rates for residential property insurance, the Bureau give public notice in at least 2 newspapers (with statewide distribution) and the North Carolina Register within 10 business days after the Bureau Files for the increase (the notice shall state that the Commissioner may or may not schedule and conduct hearings with respect to the filings).
Requires the Rate Bureau to evaluate and revise rate territories to provide more fairness in the establishment of rates.

Even though there has been tremendous progress, CFC3 would like to see further changes as follows:

A yearly audit is now required for the Beach Plan, however, the auditor is to be selected by the Commissioner. CFC3 would like to see another individual or entity choose the auditor.
Change the maximum coverage limit back to the original amount of $1,500,000.
Require more transparency in the rate-making process.
Be more specific on what "data" is to be used in the rate-making process such as the use of more actuarial data and less "modeling."
Add more specific language as to how the "surcharges" will be used.
Provide more specifics on what is the source of the funds that are part of the "pool."

City of Wilmington passed Resolution in support of CFC3!

2009-08-06T10:57:00.005-04:00

Special thanks to Mayor Saffo and the City of Wilmington for passing a Resolution in support of CFC3. Click here to read the Resolution.

Senate Passes HB 1305

2009-08-06T10:50:00.003-04:00

Yesterday afternoon, the Senate voted 42-5 in favor of HB 1305 with the following two amendments adopted:

1. An amendment that dropped the per property coverage back down to $750,000 (the amount the House approved) instead of the $1,000,000 the Senate Commerce Committee approved yesterday.

2. An amendment to freeze in place the surcharges at 5 and 15 percent for wind and hail and full homeowners policies, respectively (the Beach Plan will not be able to adjust them up). This amendment also removed the authority of the Beach Plan to surcharge dwelling and commercial policies.

The bill is on the House calendar today for concurrence.

Several Changes to HB 1305 Approved

2009-08-05T16:03:00.004-04:00

Members of the Senate Commerce Committee met today and approved several changes to House Bill 1305. Among the key changes are:

1. Keeping the wind and hail surcharge at the current rate of 5% (as opposed to the House’s recommended rate of 10%) and keeping the full peril surcharge at the current rate of 15% (as opposed to the House’s recommended rate of20%).

2. Raising the maximum coverage limit for habitational (residential)property to $1,000,000 from the House’s proposed limit of $750,000.

3. Proposing that the Rate Bureau file, no later than May 1, 2010, a schedule of credits for homeowners based on the presence of mitigation and construction features.

4. Proposing that whenever the Rate Bureau files for an increase in insurance rates for residential property insurance, the Bureau give public notice in at least 2 newspapers (with statewide distribution) and the North Carolina Register within 10 business days after the Bureau Files for the increase in which the notice shall state that the Commissioner may or may not schedule and conduct hearings with respect to the filings.

The full Senate will hear the Bill and vote either tonight or tomorrow. These are all positive changes for the residents in the Cape Fear Region.

HB 1305 is heading to Senate Commerce Committee

2009-08-04T11:07:00.007-04:00

HB 1305 will be heading to the Senate Commerce Committee on Wednesday, August 5, 2009 at 10:00am. Click here for a list of the members on the Committee and their contact information.

HB 1305 Heads to Senate Commerce Committee

2009-07-24T11:01:00.003-04:00

HB 1305 will be heading to the Senate Commerce Committee next week. Click here for a list of the members on the Committee and their contact information.

Wrightsville Beach passed Resolution in support of CFC3!

2009-07-17T15:48:00.004-04:00

Special thanks to Wrightsville Beach who passed a Resolution in support of CFC3 last night! Click here to read the Resolution.

HB 1305 Passes Third Reading in the House

2009-07-15T14:46:00.010-04:00

HB 1305 has passed a third reading in the House today and is now headed for the Senate. It will be read into the Senate Chamber tomorrow then assigned to the first Committee.

The bill only addresses the Beach Plan and has a few issues to be worked out hopefully in the Senate:

In addition to Modeling, the Department of Insurance should also use financial and actuarial data to support its position to raise rates along the coast.

"Accumulated surpluses" needs to include "surcharges" paid from coastal homeowners-need more specifics on where the "surcharges" are going to go.

Commissioner of Insurance is given "unchallenged" power and authority to make key decisions such as review of plans of operations of insurance companies, selection of an auditor to perform yearly audits on insurance companies and oversight of the rate-making process.

There needs to be some kind of review and monitoring by consumer advocacy groups.

Special thanks to the Pender County GOP who passed a Resolution in support of CFC3 last night. Click here to read the Resolution.

HB 1305 Passed Second Reading in the House

2009-07-14T15:46:00.007-04:00

HB 1305 has passed a second reading in the House today. There will be a third reading of the Bill tomorrow.

Special thanks to the Town of Burgaw who passed a Resolution in support of CFC3 today.

HB 1305 Approved by Finance Committee Yesterday

2009-07-10T08:45:00.005-04:00

HB 1305 was approved by the House Finance Committee late yesterday. There were three amendments adopted:

The deductible was changed to a one percent named storm deductible.
Removal of the flood insurance requirement (Rep. McComas introduced this one).
An amendment to require an audit of the Beach Plan

However, an amendment to reduce the surcharges on wind only and full homeowners policies from 10 to 5 percent and from 20 to 15 percent respectively failed.

The bill now heads to the House floor early next week and presumably the Senate. Click here to read HB 1305 (click the latest edition number).

Prospective Insurance Rate Hearing Request

2009-07-02T12:10:00.005-04:00

On June 30, DOI Commissioner Wayne Goodwin sent a letter to Attorney Keith Kapp (attorney for the coastal counties) stating that he is holding off on a decision regarding a “prospective rate hearing” until the General Assembly has taken final action.

What is promising is that in the letter Commissioner Goodwin states “(i)n light of the possibility of legislative changes this year to the legal framework for coastal rate-making decisions….” It seems as if the Commissioner is anticipating changes in the legislation this session regarding the insurance rates.

Click Here to read the letter.

Carolina Beach and Kure Beach pass Resolutions in support of CFC3!

2009-07-01T13:50:00.014-04:00

Special thanks to Carolina Beach and Kure Beach who have their citizens’ best interest in mind by supporting CFC3. Click here to read the Resolution from Carolina Beach and Click here to read the Resolution from Kure Beach.

Click here to read CFC3’s Resolution.

Yesterday, June 30, the Committee on Insurance heard comments and suggestions regarding HB 1305 from several individuals. Among those that spoke was Mayor Mac Montgomery from Kure Beach. Mac brought to the Committee’s attention how our region positively affects the economics of the entire state and that what one part of the state does impacts the rest of the state.

After the Committee heard all comments and suggestions it passed HB 1305. The Bill is now headed to the Committee on Finance. Representative Danny McComas is a Vice Chair and Representative Sandra Spaulding Hughes is a member of this Committee.

Legislative Update on House Bill 1305

2009-06-29T16:06:00.005-04:00

Tomorrow, June 30th, the Committee on Insurance will meet to hear arguments concerning House Bill 1305. The Committee on Insurance is part of the General Assembly and consists of Representatives from across the state. The Bill has to get out of this Committee in order to be considered.

Click here to get information regarding the Committee on Insurance.

2009-06-24T15:55:00.019-04:00

Coastal Insurance: A Brief History

The only way for many coastal homeowners to get wind and hail insurance is with a state-run program called the FAIR/Beach Plan (Beach Plan). Created in the 1960s, the Beach Plan was intended to be a last resort insurer for homeowners who couldn't get a private insurance company to cover them. However, in recent years the Beach Plan has become the main provider of insurance (mostly wind and hail) in many parts of the 18 coastal counties in North Carolina (N.C.).

Many insurance companies are wary of covering coastal properties because the N.C. Department of Insurance (DOI) has the power to determine what they, as insurers, can charge. Private companies are required to maintain reserves to cover losses from a 100 (or 150) year storm -- the worst that can be expected in a century or so. However, the Beach Plan is not required to do so.

The big question for the Beach Plan is-what if the “big storm” hits and the Beach Plan can't pay? Every insurer that does business in the state would have to chip in to cover the losses by paying what's called an assessment. And it is partly in anticipation of this that the Beach Plan submitted a request for a big rate increase. If the Beach Plan doesn't have enough to cover losses from a major storm -- and right now it doesn't -- it will need to rely on assessments on insurers that do business in the state. The request for a rate increase reflects concern about such an assessment.

Here's how some experts in the state explain the problem. They maintain that the rate-setting process isn’t a crisis; it is just a negotiation that involves tradeoffs for insurers and residents. The insurance companies do not want to be assessed in case of the “big storm.” Therefore, they want a stronger Beach Plan to minimize any assessments that may come to them. Many believe that the beach and coastal areas more prone to the effects of the “big storm” and should pay the most.

The Beach Plan's current loss-financing arrangement is designed to collect most of the necessary funds from assessments on the insurance companies. Those insurers would then want to recover these payments through higher rates on all policyholders statewide who have “basic” homeowner insurance. This is what led the DOI to raise the rates predominately in the coastal areas for “basic” homeowner insurance.

What are the insurance rate increases and how do they affect the Cape Fear Region?

There are two entities that the DOI negotiates with in regard to homeowner insurance rates; the Rate Bureau and the Beach Plan. The Rate Bureau sets a manual rate for the entire state for “basic” homeowner insurance whereas the Beach Plan insures predominately coastal properties (mostly for wind and hail). After the Rate Bureau sets the manual rate, the DOI has the authority to deviate from those rates (either increase or decrease) after negations with the insurers. Every year (for at least the last 16 years) the DOI has implemented rate increases on the coastal counties with New Hanover, Pender, Onslow and Brunswick getting the largest rate increases. Click Here to review the NC Homeowner Base Rate increases since before 1993.

On December 18, 2008, the DOI approved the greatest rate increases so far for “basic” homeowner insurance; 29.8% for “coastal” areas (areas west of the Intracoastal Waterway) and 17.5% for the “beach” areas (areas east of the Intracoastal Waterway). These rate increases took effect on May 1, 2009, see Territory Map and Rate Increase Chart for 2009.

In addition, on November 21, 2008, the DOI approved additional increases (surcharges) to the Beach Plan. The Beach plan uses the Rate Bureau rates then implements surcharges on top of those rates to set their own rates for insurance. The surcharges are now 5% for wind and hail and 15% for full peril coverage (includes both “basic” and wind and hail) but in the November 21, 2008 Decision, the DOI allowed the Beach Plan to raise those surcharges by an additional 10% thereby increasing the surcharges to 15% for wind and hail and 25% for full peril coverage. These increases were due to take effect on February 1, 2009.

What makes this decision so particularly unfounded is the fact that since 1986 only 26% of the claims for wind and hail damage were from coastal counties which means the remaining 74% of the total claims were from the other 82 counties outside the coastal areas. To review the NC Residential Property Adjusted incurred losses due to Wind and Hail, please click on Chart 1, Chart 2.

What has been done to stop the increases from taking effect?

The Lawsuits

On December 22, 2008, Dare County, Town of Nags Head, Starco Realty & Construction, INC., and Joseph M. Geraghty, through their attorney Keith Kapp (from the law firm of Williams Mullen) filed several proceedings in Wake County against the N.C. Department of Insurance (“NCDOI”), the Commissioner of Insurance (“Commissioner”) and other named parties. Click Here to read a summary of the lawsuit and Click Here to review the judicial timeline.

Then on January 29, 2009, the issue was heard by Hearing Officer Hale who, the next day, on January 30, 2009 dismissed the motion regarding the November 21, 2008 Decision to Stay the rates in the Beach/FAIR Plan for lack of subject matter jurisdiction. The motion was then moved to Superior Court and heard by Judge Pittman on February 4, 2009 who then issued his Order on March 20, 2009 to Stay the Beach/FAIR Plan rate increases. This Order did NOT address the "basic" homeowner insurance rate increases due to take affect May 1, 2009.

On Tuesday April 7, 2009, an administrative hearing was held at the DOI regarding the December 18, 2008 Decision to increase "basic" homeowner insurance rates along the coastal counties. This hearing differs from the hearing held on January 29, 2009. At the January 29, 2009 hearing, the issue was the November 21, 2008 Decision implementing Beach/FAIR Plan increases for wind and hail policies only and did not address the December 18, 2008 decision to raise "basic" rates. On April 16, 2009, Hearing Officer Hale denied the Motion to Stay the "basic" homeowner insurance rate increases.

Then on April 29, 2009, Superior Court Judge Ronald L. Stephens denied the Motion to Stay the "basic" homeowner insurance rate increases and on May 13, 2009, the N.C. Court of Appeals upheld this decision.

Even though both Decisions employ increases on our coastal insurance rates, they differ in exactly which rates are affected. The November 21, 2008 Decision (Beach/FAIR Plan) implemented a 15% to 25% surcharge on wind and hail policies as well as a 2% increase in deductibles due take effect on February 1, 2009. The December 18, 2008 Decision ("basic" insurance rate increase) implemented a 29.8% increase in overall homeowner insurance rates for New Hanover, Pender, and several other coastal counties due to take effect on May 1, 2009.

Shortly after the decision denying the Stay on "basic" homeowner insurance rate increases, Attorney Keith Kapp (the Attorney for the coastal counties) sent a letter to Commissioner Wayne Goodwin. Click here to read a summary of the letter.

The letter emphazies the importance of the citizen's right to be heard and present evidence to support a rate decrease. The letter also contains evidence to prove that the decision to raise rates in eastern N.C. was excessive and unfairly discriminatory. Click Here to read the entire letter.

The Legislation

There have been several bills introduced in the General Assembly this session regarding the insurance rate increases in the attempt to achieve fairness in the rate-making process. However, with the insurance companies hiring their own lobbyists (as much as 15 lobbyists at a time) and the majority of the votes in the General Assembly coming from regions west of I-95, the possibility of legislation getting passed this session will be a challenge. Click Here for a legislative timeline of bills introduced in the General Assembly this session.

In addition, the present Commissioner, Wayne Goodwin, has vowed to fight any legislation that would change the process-even going so far as to write a letter to Governor Perdue asking her to “(r)eject bills proposing any stay of increased homeowners rates and Beach Plan factors.” Click Here to read the full letter.

In April of this year, Representative Holliman (Davidson County) filed HB 1305 which integrates the recommendations of the Joint Select Study Committee on the Potential Impact of Major Hurricanes on the N.C. Insurance Industry. Some of the key points in HB 1305 are as follows:

- The Beach Plan be exempt from state and federal taxation to the fullest extent permitted by law.

- The accumulated surplus from the Beach plan shall be retained from year-to-year and used to pay losses, reinsurance costs and other operating expenses. No member company shall be entitled to the distribution of any portion of the Beach Plan surplus.

- The Beach plan can issue insurance subject to a maximum of $750,000 on habitational property and $3,000,000 on commercial property....

- The Beach plan MAY, subject to prior approval of the Commissioner, adopt a schedule of special surcharges...relating to...policies issued by the Beach plan.

- Surcharges set forth...shall be examined by actuaries ...to determine whether the surcharges are actuarially sound and appropriate.

- Beginning July 1, 2010, the Beach plan shall submit to the Commissioner for review by July 1 of every two years a report on the surcharges...and any relevant factors related to these surcharges for the Commissioner's review.

Click Here to read a summary of the Joint Select Study Committee on the Potential Impact of Major Hurricanes on the North Carolina Insurance Industry.

Click Here to read the entire Recommendations of the Joint Select Study Committee on the Potential Impact of Major Hurricanes on the N.C. Insurance Industry.

Click Here to read HB 1305 then click the latest edition number on the left hand side of the page.

On the Federal level, the U.S. House of Representatives has introduced HR 2555, The Homeowners’ Defense Act of 2009, which addresses natural disaster insurance across the country. The goal of the bill is to ensure the availability and affordability of homeowners' insurance coverage for catastrophic events. Click Here to read HR 2555.

We're Just Going to Have to Make a Little Noise: Click Here to read the editorial published in the Greater Wilmington Business Journal.

CFC3 will keep you posted on the status of HB 1305 and any other bills relating to homeowner insurance both in the N.C. General Assembly and in Washington D.C.

Please check back for future updates on this issue and others.

Click Here for informative websites.