By Rob Morris on December 21, 2017
Homeowners across much of eastern North Carolina are once again facing a possible double-digit rate hike for insurance policies, and the disparity betwee the coast and interior sections of the state would remain at all-time highs.
The N.C. Rate Bureau, which represents the state’s insurance industry, has asked the Department of Insurance for a rate increase of 25 percent effective in June 2018 in Dare, Hyde and Currituck counties.
Willo Kelly, legislative affairs liaison for the Outer Banks Homebuilders Association, Outer Banks Realtors and the NC-20 group of coastal counties, was one of just four people to speak at a public hearing on the request last week in Raleigh.
She pointed out that the request is unnecessary, especially because up to 80 percent of the premium paid by local homeowners is to cover wind damage, and the company that writes what’s commonly referred to as “Beach Plan” polices is flush with cash.
“They haven’t had to make a major payout for wind damage in North Carolina since Hurricane Irene in 2011,” Kelly said.
The N.C. Insurance Underwriting Association is currently sitting on a $1.8 billion fund balance from the last five years alone, and could easily handle covering losses from even a catastrophic hurricane that wiped clean the N.C. coast from Currituck to Calabash, according to Kelly.
“When exposure was at $73 billion, the Beach Plan projected potential risk from the ‘big one’ at about $4 billion,” Kelly said.
That means the company predicted that the worst case scenario storm would cost NCIUA $4 billion for all the products they offer including loss of use, personal property and structures.
Under the proposal, the annual premium for a $200,000 policy that includes fire, liability and wind coverage on the Outer Banks would rise from $2,259 to $2,823.
The same policy for inland sections of the three counties would increase from $1,437 to $1,796.
The original request submitted earlier this fall called for a 68.7 increase on the barrier islands of the three counties, and 34.4 percent interior sections.
That would have jacked up premiums on the Outer Banks to $4,057 and on the mainland to $2,056. The bureau later scaled back the request, saying they would cap the increase at 25 percent in both areas.
“When you add all these insurance payments up – homeowners, wind and flood insurance – some homeowners could be paying more for insurance than their mortgage payment,” Kelly said.
Kelly said condo and dwelling polices would also make a significant jump under the request, in some cases up to 40 percent across the state.
Tyrrell, Washington, Beaufort, Camden, Pasquotank, Perquimans, and Chowan are facing a 8.2 percent rise, while Gates and Hertford would only see an increase of 4.2 percent.
The state’s major metropolitan areas would also be hit with increases of between 15 and 23 percent, while the southwestern mountain counties would get decreases of between 3.6 and 7.1 percent.
If granted, the hike averages out to around 18 percent statewide and would be the first jump since 2013.
Industry representatives say they need to raise premiums, especially in coastal areas, in case disaster hits such as that on the scale that decimated the Florida Keys and southeast Texas this past hurricane season.
But the last five years of premium incomes when compared to the losses suffered in North Carolina for just one insurance plan do not appear to justify the request.
Documents from the North Carolina Insurance Underwriting Association, which handles wind policies for coastal areas, show that the last time there was a major payout for wind-related damages was in Fiscal Year 2011, when Beach Plan premiums totaled $302 million and losses were $133 million.
Over the five year period from 2011 to 2015 alone, NCIUA took in just under $1.9 billion in premiums and paid out just under $235 million.
The figures do not reflect money spent on commissions, company operations, reinsurance purchased by NCIUA as back-up and other expenses.
The last time the insurance industry asked for an increase in 2015, Outer Banks homeowners got a rare break when former Insurance Commissioner Wayne Goodwin reversed the request of a 35 percent increase for beach areas.
A reduction of 9 percent was granted and Goodwin openly questioned how insurers calculate potential losses from hurricanes.
Current Commissioner Mike Causey, who defeated Goodwin in the 2016 elections, will then issue his ruling on the request, which would likely go through an appeal process.
Public comments on the proposal until Dec. 29 via email, 2017HomeInsurance@ncdoi.gov, or by mail to Tricia Ford, 1201 Mail Service Center, Raleigh, NC 27699-1201.