NC Declines Surge in Coastal Insurance Rates Proposal

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TL/DR –

The North Carolina (N.C.) Insurance Commissioner, Mike Causey, has rejected a proposed increase of 42% in homeowner insurance premiums by the state’s insurance industry. The N.C. Rate Bureau, which represents the state’s insurance companies, argued that the increase was due to inflation, labor and material shortages from the COVID-19 pandemic, and climate change causing more frequent property damage from severe weather events. The rejection begins a negotiation process between regulators and the industry, with Causey stating that consumers deserve a more thorough review of the proposal.


N.C Insurance Commissioner Rejects Homeowner Insurance Premiums Increase

North Topsail Beach after Hurricane Florence

As expected, N.C. Insurance Commissioner Mike Causey recently refused a state insurance industry proposal to increase homeowner insurance premiums by 42% statewide, with an extraordinary 99% rise in beach and coastal sectors around Wilmington.

Causey expressed surprise at the substantial amount insurers requested, signalling this rejection is just the beginning of potential negotiations with the industry.

Rationale Behind the Proposed Increase

The N.C. Rate Bureau, representative of the state’s insurance companies, attributed the proposed hike to escalating costs driven by inflation, labor/material shortages due to the COVID-19 pandemic, and climate change’s impact causing more frequent and severe weather events, leading to increased property destruction.

Don Hornstein, an insurance law expert at the University of North Carolina School of Law, highlighted two additional factors: the moratorium on rate increases during the pandemic, and the cost of reinsurance, spurred by increased global weather risks.

Public Reaction and Next Steps

The proposed rate hikes, particularly the dramatic 99.4% increase for beachfront properties in certain coastal counties, sparked widespread public outrage. Causey affirmed over 24,000 email comments and hundreds of mail comments concerning the proposal were received, leading to further review and negotiation.

As part of North Carolina’s regulated homeowner and auto insurance markets, the insurance commissioner has the authority to reject the rate bureau’s proposal and schedule a hearing, which Causey has done for Oct. 7.

Given the upcoming election in which Causey is seeking re-election, these hearings could serve as a platform to confront the proposed rate increase. However, Hornstein suggests there will likely be negotiations between state regulators and industry to balance the needs of property owners and industry.

Hornstein warns that without a balance, North Carolina’s insurance market might resemble Florida, Louisiana, or even California, where insurance companies have left due to disaster exposure risks.

“If insurers don’t feel they have enough rates, they will cancel policies or pull out,” Hornstein said, referring to Nationwide‘s non-renewal of over 10,500 policies in the state last year, primarily due to hurricane concerns.

Flooding in Pender County due to Hurricane Florence

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