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@NCCapitol

Bill giving insurers ability to raise rates, offer discounts fails in committee

Posted April 16, 2013

— 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.

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  • Coastal Native Apr 17, 2:06 p.m.

    Do all of you guys like that NCRF charge added into your Auto Insurance policy? This Bill would right off the bat do away with that. That fee goes to run the Reinsurance Facility. It would save the average single person about $40 per year and a family policy about $90 per year.

  • Coastal Native Apr 17, 2:04 p.m.

    Rates are going to go up for everyone no matter what. Cost's increase, so don't think that just because you are a careful driver and haven't gotten any tickets that your rate won't increase. I could be getting a 15% refund every year but the state won't allow it. Nice conclusion, just because every state in the country does it the same way except NC that they are all wrong. What is the real reason NC does it this way? Could it be to keep more people employed in the government?
    Slider99
    April 17, 2013 1:30 p.m.
    The problem is nobody likes or trusts change even when it is for a better solution. NC has been behind the times on a lot of things and it is starting to cause problems.

  • Coastal Native Apr 17, 2:02 p.m.

    Actually Coastal, I have a perfect driving record and I am a senior but every time they get a rate hike of any kind, they pass it on to those of us who drive careful and don't get tickets. So not real sure what you are talking about. Just because someone else in another state does something, doesn't make it good or better for NC.

    Signofthetimes Your rate goes up because they are spreading the cost over everyone and cannot charge the adverse drivers a higher rate. That is the whole premise of doing away with the old system to award the better driver. They have more drivers in NC in the Assigned Risk Pool than all the other states combined.

  • Slider99 Apr 17, 1:30 p.m.

    Rates are going to go up for everyone no matter what. Cost's increase, so don't think that just because you are a careful driver and haven't gotten any tickets that your rate won't increase. I could be getting a 15% refund every year but the state won't allow it.
    Nice conclusion, just because every state in the country does it the same way except NC that they are all wrong. What is the real reason NC does it this way? Could it be to keep more people employed in the government?

  • dontstopnow Apr 17, 9:41 a.m.

    Actually Coastal, I have a perfect driving record and I am a senior but every time they get a rate hike of any kind, they pass it on to those of us who drive careful and don't get tickets. So not real sure what you are talking about. Just because someone else in another state does something, doesn't make it good or better for NC.

  • Coastal Native Apr 17, 9:32 a.m.

    Guys the premium has to come from somewhere. There are a lot of drivers out there that cannot drive and companies are having to spread their cost over the good drivers vs charging the bad drivers more. If the NC Rate Bureau system is so great why have other states abandoned it? If you have a good driving record you don't have anything to worry about. If you have a bad driving record its time to pay up and quit making me supplement your accidents and violations.

  • dontstopnow Apr 17, 8:42 a.m.

    I see State Farm is one of the vultures trying to get the rates raised so that means, I will be changing insurance companies. Maybe Progressive can handle another customer. :)

  • HeadsUp Apr 16, 3:13 p.m.

    This is a win for North Carolina consumers, their low auto insurance rates, and common sense. Thankfully, reality trumped theory, as it should.

    Now the legislature can focus on making reasonable improvements, like allowing more kinds of options and discounts, without destroying a system that is is working very well, with lots of competition, important consumer protections for a *mandatory* product, and very low rates.