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Insurance commissioner defends higher Beach Plan rates

Posted February 23, 2009
Updated March 9, 2009

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— North Carolina's new insurance commissioner says legislative efforts to freeze increased insurance premiums for coastal homeowners risks making policies less available and less competitive for all residents.

Commissioner: Bills could make homeowners insurance unaffordable Commissioner: Bills shouldn't set coastal rates

Insurance Commissioner Wayne Goodwin said Monday that lawmakers could upset the balance between competition and the need to beef up the state-sanctioned Beach Plan. The program offers insurance to homeowners in 18 coastal counties at higher-than-market rates when private insurers will not issue policies on a property.

"I want our legislators and the public to know that if we let certain things happen, if we aren't proactive, then all North Carolinians are in jeopardy of having no access to affordable insurance," Goodwin said.

He urged legislators to reject bills that delay or eliminate recent premium increases to the existing Beach Plan. Those increases, Goodwin said, were the product of a complex analysis by former Insurance Commissioner Jim Long.

"We're talking about something that depends on actuarial science, upon statistical and other types of mathematics, the business of insurance and how markets run and capitalism, and then you throw into the mix of what's already complex – meteorological science," Godwin said.

Known officially as the North Carolina Insurance Underwriting Association, the Beach Plan has a pool of money to cover claims. When that is exhausted, all property insurers in the state have to pitch in to make up the difference.

In September, the Insurance Federation of North Carolina estimated that the Beach Plan can cover up to $2.5 billion in losses – far short of the $75 billion in property damage that the federation says could result from a severe hurricane.

Senate Bill 6 and House Bill 26 would hold off increased surcharges of up to 25 percent for homeowners' coverage and up to 15 percent for wind damage that the Beach Plan charges above what regular insurers can offer. The increased surcharges took effect with new policies written since Feb. 1.

Goodwin defended the increases, saying they led insurers to keep premiums down in other parts of the state.

The insurance commissioner cautioned that if insurance companies can't trust North Carolina to uphold the negotiated deal, they could stop writing policies in the state, which State Farm did in Florida.

A State Farm representative said that the company sees North Carolina and Florida as unique markets and, for now, is satisfied with North Carolina's state insurance plans.

"Given the leadership from the Department of Insurance, we're confident that we're going to move forward and come out of this with a resolution that's beneficial to consumers and to insurers alike," said Russ Dubisky, with State Farm.

Goodwin suggested that North Carolina also work with other East Coast states to establish a regional plan for coastal homes.

25 Comments

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  • davidbh61255 Feb 24, 2009

    Let the people who choose to live on the coast or own property there pay for that luxury. High insurance rates are part of it! When I go to the coast there are no discounts for inland North Carolinians, so why should we subsidize THEIR insurance costs?

  • vote4changeASAP Feb 24, 2009

    The insurance plan included counties that were no where near the coast but in the line of damaging winds once a hurricane comes inland. Sampson County insurance rates rose above 7% whereas Wake County rates rose only about 2%. Considering Sampson County is a rural county, it does seem unfair that those whose salaries on average are less than those in Wake County have to pay more for insurance.

  • geosol Feb 24, 2009

    Simple. Set the rate based on income level and property value. Don't hose the working folks to help pay for the fat cats.

  • Madonna Feb 23, 2009

    With sea level rise of 3-7 feet, this will all be a moot point at some point.

  • forensics Feb 23, 2009

    I do agree that coastal residents should pay a higher rate because they do have a higher risk, but this is not the way to do it. The taxpayers are not subsidizing this, the insurers are. The Beach Plan as they call it applies to about 20% of the state. There are many hard working middle class people who live in average homes nowhere near the beach. The increase in rates is a contingency plan in case of a hurricane like Katrina. There is no need to increase the rates 120% immediately. Raise them gradually over several years so that people can make arrangements to pay.

    Remember that hurricanes don't always affect the beaches most severely. Floyd affected Tarboro, Wilson, and points west much worse than the beach. Remember when Hugo went to Charlotte?

  • billy Feb 23, 2009

    Let the market set the rates.
    Keep politics, and politicians, out of the insurance business.

  • Wake1 Feb 23, 2009

    It IS about the beach front property! Insurance rates aren't going up because more houses are being damaged in Raleigh - it's the coast. Anyone knows a house built on sand near the ocean is much more likley to have to be rebuilt than one inland. If you love the beach & buy a house there, accept the responsibility & risk that comes with it!

  • Six String Feb 23, 2009

    Why should I have to pay for snow plows and salt for the roads in Asheville? I don't live there. Why do I need to pay for all these bridges and schools out there? I don't drive over half of them and don't have children that are school age. It's just not fair that I can't have it all my way.

  • cubed32696 Feb 23, 2009

    Two words

    Fran Floyd

  • nepatterson Feb 23, 2009

    I appreciate that most people in the state don't want to subsidize people who build expensive homes on the beachfront (I sure don't) and I also appreciate that those are the minority of homes covered by the Beach Plan and that the Beach Plan is going to hit a lot of middle and working class homeowners pretty hard. Isn't there some kind of compromise that could be made such as limiting the pay out to no more than 120% (or some other figure that is reasonable) of the median value of homes in a county. This would make sure the average year-round resident is covered or mostly covered, but wouldn't be sucking the life out of the rest of the state to cover non-resident (or resident) homeowners who over-built on shifting sands. In Dare County for instance that the median value (not sales price) of homes was $193,155 in 2007 as opposed to the median value of $145,700 for a home in Wake County during the same year. It just seems like there ought to be some sensible solution to this issue.

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