News....Insurance Industry Seeks Up To 70 Percent Rate Increase For Homeowners

Dec. 4--The North Carolina insurance industry has issued a rate increase watch for the state's coast, with a proposal to raise homeowner premiums by 42 percent to 70 percent in 18 counties -- including New Hanover, Pender and Brunswick -- next year.

In a report to a General Assembly special committee Tuesday, the N.C. Rate Bureau said it will ask for the increase when it files its rate plan with the N.C. Department of Insurance. The filing is expected next week, department spokeswoman Kristin Milam said Wednesday.

The proposed increases would amount to an average 19.5 percent statewide, though that figure would vary widely depending on location -- from 1.2 percent to 22.5 percent, according to Tim Lucas, personal lines manager with the Rate Bureau in Raleigh. The Rate Bureau collectively represents the insurance industry in setting rates.

The proposed increases will be 32 percent to 51 percent for beach areas, defined as those parts of the 18 counties that are east and south of the Intracoastal Waterway, Lucas said.

Any rate increase will face months of negotiations and typically come in lower than requested. But a premium hike next year would come on top of an average 25 percent increase in the coastal counties last year and a 15 percent increase in 2005.

Rate Bureau officials indicated that the proposed hikes are needed to stabilize the Beach Plan, a state-funded program aimed at providing windstorm coverage for coastal residents who cannot obtain it in the private market. 

The Beach Plan has been chronically undercapitalized, and a report commissioned by the Property Casualty Insurers Association of America and presented to a legislative committee in October, said that the plan has no more than $1.5 billion available to pay for hurricane losses and that a large storm could likely cost more than $7 billion.

"If a major storm hits and the Beach Plan does not have the ability to pay its claims, all homeowners across the state suffer," Robert Herlong, vice president and regional manager for the Property Casualty Insurers, said in the report.

Sharing the costs is a key issue in the battle over insurance rates and how they are applied in North Carolina.

State Rep. Bruce Goforth, D-Asheville, and a member of the legislative committee, told the Charlotte Observer Wednesday that the rest of the state would pay the insurance for the owners of beachfront mansions. "They've got the money to pay for the insurance. They should be paying," Goforth said.
But Rep. Danny McComas, R-New Hanover, told the Star-News that he has "had numerous conversations with (General Assembly) members in the western part of the state. 

"The fact does not escape me that most of the damages caused by hurricanes have been west of (Interstate) 95," McComas said Wednesday. He cited the effects of hurricanes and tropical storms on the interior -- from flooding in Asheville and Raleigh to Hugo's hit on Charlotte.

"It is appalling what is going on," he said of the proposed rate increases. 

The insurers report, however, said that the Beach Plan offers "low deductibles at rates far below what actuaries maintain to be appropriately matched to risk. North Carolina's 'plan of last resort' has become the first and only choice for coverage for many coastal homeowners."

It's not just barrier island residents who must turn to the Beach Plan.

"It's very difficult to get insurance through the private sector," said Donna Girardot, executive officer of the Wilmington-Cape Fear Home Builders Association.

"It's a ticking time bomb," Girardot said, referring to how N.C. Insurance Commissioner Wayne Goodwin has characterized the state of the Beach Plan. "But it's not the best step at dismantling the bomb now."

Girardot worried about the effects of a large insurance hike in the midst of a recession and a major housing slump.

"It's going to affect everyone who owns a home or wants to buy one. The market is slow already, and this is not what we need right now." Girardot said, adding that obtaining insurance is required in order to get a mortgage."

Girardot wonders where incentives or tax rebates might fit into solving the coastal insurance problem.

"As always I never ever see that word 'incentives' or 'tax rebates," or anything like that" in proposals for a fix. 

She pointed out that insurers do not offer premium breaks for people "who retrofit their homes or invest in putting in roll-down shutters when they build them."

McComas called the Beach Plan and homeowner insurance in general "a statewide problem. It's not a coastal problem. When you start finger-pointing, that's where the problems come from because nothing gets done.

"We need to work together to solve this. Roll up our sleeves and get to work."

This is a news service of Thomson Business Intelligence Service ©2006.