Bill giving insurers ability to raise rates, offer discounts fails in committee
Posted April 16, 2013
Raleigh, N.C. — A bill that opponents, including local car insurers and North Carolina's insurance commissioner, said would raise car insurance rates on most drivers failed in committee Tuesday.
Voting 18-11, the House Insurance Committee rebuffed a measure sought by national insurance companies such as State Farm, Geico and USAA. Although this doesn't absolutely kill the measure, advocates watching the issue say lawmakers are likely to move on to a more modest measure that allows for more discounts without changing the state's regulatory structure.
Dozens of lobbyists and insurance executives crammed into the concrete-walled committee room Tuesday after weeks of pigeonholing lawmakers over the bill. Committee Chairman Jerry Dockham gave a few of those lobbyists a chance to speak the committee.
"This will lower costs for a large percentage of drivers," argued David Stoller, a lobbyist for State Farm.
Under the state's current system, car insurers must request rate increases as part of a formal group known as the Rate Bureau. Once that request is made, the state's insurance commissioner holds hearings and decides whether the increase is reasonable.
North Carolina is the last state in the nation to have this kind of structure. Stoller said that it is a heavy-handed regulatory scheme that keeps companies from offering new discounts, such as Progressive Insurance's "snapshot" program.
"We're the only state that doesn't get the same discounts everybody else does," he said.
Under the measure before the committee Tuesday, insurers could have raised rates by an average of 7 percent per year across all of those customers. Backers of the bill say insurers would have an incentive to keep rates low in order to compete, but opponents pointed out that companies could have larded all of their increases for a single year on a particular group of drivers, such as those under 25 or over a certain age.
The bill also got support from the John Locke Foundation, a conservative think tank that argues for less regulation. They argued that good drivers end up paying a "hidden surcharge" that goes to subsidize drivers who are statistically riskier, such as those between the ages of 16 and 20.
Opponents of the bill answered back that North Carolina has the third-lowest insurance rates in the nation as a result of the current regulatory scheme.
Insurance Commissioner Wayne Goodwin said the roughly $12 annual fee most drivers pay as a "recoupment" surcharge for risky drivers under the current scheme is negligible compared to the rate increases that would be allowed under the measure.
"If you pass this bill, car insurance rates will go up," Goodwin said. "The only people speaking for this bill stand to profit from it."
Stoller and other proponents said that Goodwin would still have had the power to keep rates in check. Goodwin scoffed at that notion.
"There's no way I can stop rate increases ... the way the process is set up in that bill," he said.
As the committee moved to a vote, Rep. Tom Murry, R-Wake, made a motion to delay consideration of the measure. Dockham, R-Davidson, declined to accept that motion, saying he had announced that a vote would be taken.
Rep. Jeff Collins, R-Nash, then moved for the bill to pass. Dockham, Rep. Nelson Dollar, R-Wake, and Rep. Jim Fulgham, R- Wake, voted against it. Among the Wake County representatives voting for the measure were Murry and Rep. Chris Malone, R-Wake.
Both the Senate and House have bills pending that would allow for more discounts but don't disturb the commissioner's rate making authority.