NC insurance commissioner has rejected a requested 42.2% rate hike. What to know.

Update: Insurance Commissioner Mike Causey has rejected the Rate Bureau’s request for a 42.2% average increase in home insurance rates in North Carolina. The bureau and the state Department of Insurance will now try to reach a settlement on a new rate. If they can’t agree, a court date has been scheduled for Oct. 7.

Here’s everything you need to know:

What’s behind Rate Bureau’s latest filing?

It’s been three years since the last rate increase — in November 2020 when the Rate Bureau asked for an overall rise of 24.5% and ultimately received 7.9%. Insurers say it’s time to renegotiate.

The N.C. Rate Bureau, which represents companies that write insurance policies in the state, last month requested an average 42.2% hike in homeowners’ insurance across the state. It’s seeking even steeper spikes for storm-prone areas along the coast.

On Feb. 6, North Carolina Insurance Commissioner Mike Causey rejected the request, saying he was “shocked” at the amount requested.

“The Department of Insurance has received more than 24,000 emailed comments on this proposal, with hundreds more policyholders commenting by mail,” he said in a release. “Scores more consumers spoke during a public comment forum. North Carolina consumers deserve a more thorough review of this proposal. I intend to make sure they get that review.”

Jarred Chappell, the Rate Bureau’s chief operating officer, said he wasn’t surprised by the commissioner’s response.

“This is an expected step, and part of the rate filing process,” he said in an email to The N&O. “It doesn’t preclude settlement talks, and many rate negotiations have been settled before the hearing date arrives.”

Rising construction and labor costs, weather-related losses, and the state of the reinsurance market are making it harder for them to operate in the state, he argued.

“This is an expensive time. Data shows rates need to increase in order to maintain a healthy market in the state. Insurance carriers’ costs have gone up drastically since the last homeowners filing [in November 2020].”

Because of mounting risks, one of the nation’s largest insurers, Nationwide, pulled out from part of the state, not renewing some 10,000 insurance policies in Eastern North Carolina.

What is the Rate Bureau asking for?

The Rate Bureau submitted a rate filing to the North Carolina Department of Insurance on Jan. 3, asking for an average statewide increase in homeowners’ insurance rates of 42.2%.

Across the Triangle, it’s slightly less. In Durham and Wake counties, it’s asking for a 39.8% increase. In Chatham and Orange counties, it’s requesting 25.1%.

Meanwhile, coastal regions — like Brunswick, Carteret, New Hanover, Onslow and Pender counties — could face the steepest increases. The Rate Bureau wants to nearly double the cost of premiums in those counties — a 99.4% jump.

The lowest — 4.3% — is proposed for Haywood, Madison, Swain and Transylvania counties, all in the mountains west of Charlotte.

The Rate Bureau has asked the rates to be become effective Aug. 1.

For a full list of the Rate Bureau’s proposed rate increases, go here.

As it evaluates risk, Nationwide won’t renew 10,000 insurance policies in Eastern NC

Why is the Rate Bureau proposing increases at his time?

After a moratorium on filings lifted in 2024, Chappell said the filing was necessary amid a worsening economic landscape for insurance markets.

In particular, the cost of reinsurance — the insurance that covers insurance companies — has skyrocketed, he said.

Risk analysis firm Guy Carpenter recently reported that reinsurance rates on property in the United States increased between 10% and 30% for loss-impacted residents in 2023.

Climate change and the increased risk for “catastrophic losses” it causes in coastal areas is largely to blame, Chappell said.

Increased wind and hail losses from storms like 2016’s Hurricane Matthew and 2018’s Hurricane Florence prompted the Rate Bureau’s request for 24.5% in 2020.

Inflation and the rising costs of materials and labor are aggravating the situation. “It’s putting a greater strain on the cost of getting the actual repair work done,” he said.

Rate filings use historical data to develop a “fair and adequate rate” for homeowners’ insurance, he said.

There have been three changes to homeowners’ rates since 2014:

• A 4.8% increase in 2017. The Bureau had requested 18.7%.

• A 4.0% increase in 2018. The Bureau had requested 17.4%.

• A 7.9% increase in 2020. The Bureau had requested 24.5%.

Will every policy holder in the state see the proposed increases in their premiums?

No. The Rate Bureau is requesting a change to the base rate, which must be approved by the state’s commissioner of insurance, Mike Causey.

That does not mean that rate trickles down to every policy holder in the state.

Chappell said insurance companies use a “variety of deviations” to accurately price homeowners’ policies based on their individual risk.

“Changing the base rate, as we have requested, may not have a direct impact on some policy holders who are already priced accurately,” he said.

What happens next?

The Department of Insurance can either agree with the requested rates as filed or negotiate a settlement with the Rate Bureau on a lower rate.

By statute, the commissioner has 50 days to respond to the filing either by accepting it as filed or by requesting a formal rate hearing to discuss the request further.

Does the public get a say?

Yes. A public comment period is required by law to give the public time to address the proposed rate increase. A public forum and a virtual forum were held in January. Written comments were accepted until Feb. 2.

How can homeowners be better prepared?

Brenda Wells-Dietel, professor of risk and insurance at East Carolina University, said homeowners need to adjust their expectations.

“The days of low deductibles — like 1% for wind [damage], for instance — are over for the foreseeable future,” she said.

To keep premiums down, homeowners should consider a higher deductible.

In general, insurance is meant to be used for large losses that would create a financial burden, not as a mechanism for minor repairs.

“Take the highest deductible you can afford,” she said. “For me, 5% of my home’s value is more than I’m comfortable with, but I could definitely consider going from 1% to 2%.”

Homeowners should also “shop around” for a reputable insurance agency with the best prices.

“The last thing you want after a loss is to find out you have inferior insurance protection,” she said. “If the price sounds too good to be true, it probably is.”

NC Reality Check is an N&O series holding those in power accountable and shining a light on public issues that affect the Triangle or North Carolina. Have a suggestion for a future story? Email realitycheck@newsobserver.com

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