N.C. homeowner insurers want to raise rates by more than 42%
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Insurance companies in North Carolina want to raise homeowner premium rates statewide by more than 42% on average. Whether or not they will, though, will be determined at a hearing in Raleigh over the coming weeks.
Why it matters: An increase in insurance rates comes as many households are already struggling with rising costs — and it will make homeownership in the state more expensive.
- At the same time, however, rising building costs and an increased frequency of climate disasters are weighing on insurance companies' profits nationally and throwing the industry into tumult.
- Insurance companies increasingly are leaving disaster-prone states like Florida and California. Already, some have left some coastal parts of North Carolina.
Driving the news: The state's Department of Insurance and the N.C. Rate Bureau, an entity that negotiates for the industry, are locked in a quasi-judicial proceeding in Raleigh, expected to last weeks, to determine where insurance rates will be set, The Associated Press reported.
Context: North Carolina is rare in that it mandates an entity — the N.C. Rate Bureau — to negotiate on behalf of the entire industry, rather than each insurance company filing independently, according to The News & Observer.
- The proposed rates differ across the state, with the Rate Bureau requesting a 99% increase in some coastal areas, around 40% in Raleigh and Durham and around 20% in parts of the mountains affected by Hurricane Helene, The AP noted.
- The Insurance Department has argued, however, that the Rate Bureau's asks are inflated and use actuarial methods that ignore state law.
Between the lines: Insurance Commissioner Mike Causey, who is up for re-election in November, rejected the initial request from the Rate Bureau in February. But often he's settled rate increases before hearings after privately meeting with the Rate Bureau.
- Causey is not presiding over the current hearing, instead picking an attorney from the Insurance Department to lead it.
- But, after the hearing, he will issue an order for new rates — likely after the election — which can be challenged in court.
- "State law requires me to strike a balance by verifying that rates are adequate so that insurance companies can cover claims while making sure they are not excessive or unfairly discriminatory. I intend to do just that," Causey said in a statement.
The other side: Causey's opponent, Democratic state Sen. Natasha Marcus, has criticized the commissioner for previously raising rates without holding a public hearing, saying this one is only happening because he's "been under fire for his lack of accountability and transparency" and an election will happen next month.
Zoom in: Home insurance has been profitable for much of the past decade in North Carolina, The New York Times found, but the industry's profits are declining. The state has also just experienced yet another multi-billion-dollar storm disaster after Helene ravaged the mountains, though most of that damage came from flooding, which isn't covered by typical home insurance.
- David Marlett, the managing director of the Brantley Risk & Insurance Center at Appalachian State University, said insurance companies have endured better in North Carolina than some other states because of its "consent to rate" exception.
- The exception — which has kept many companies from potentially exiting the state — lets companies insure some high-risk homeowners at rates up to 250% of the bureau's rate.
The big picture: The breakdown of the insurance market could hamper North Carolina's economy, which has seen huge population growth, by making home ownership prohibitively expensive, Marlett said.
- In Florida, where insurance premiums are up more than 400% in certain areas over the past five years, home insurance costs are starting to put a chill on the state's housing market and causing many to reconsider living there, The Wall Street Journal reported this week.
What they're saying: Marlett said the uncertainty of future costs is causing insurance companies to ask for big rate increases nationwide, putting more pressure on homeowners.
- "Because of the uncertainty over a changing climate, the hotter oceans, the increased moisture in the atmosphere ... the natural reaction from an insurance operation is to try to err on the side of overestimating than underestimating," Marlett told Axios. "Because, if you underestimate it, you go out of business."
Editor's note: We've updated this story with a statement from Mike Causey.