At the end of July, state officials announced that the N.C. Rate Bureau had requested a 50.6% statewide average rate increase for dwelling policies.
They emphasized in a news release that dwelling insurance policies are not homeowners’ insurance policies. Such policies “are offered to non-owner-occupied residences of no more than four units, including rental properties, investment properties and other properties that are not occupied full time by the property owner.”
In other words, the owners of rental and second homes in the Wilmington area and New Hanover County’s beach towns of Carolina, Kure and Wrightsville beaches would feel the effects.
The N.C. Department of Insurance release also noted that the Rate Bureau represents insurance companies in the state and is not part of the state government.
According to the release, the Rate Bureau filed the proposed increase with the Department of Insurance on July 13.
The request would take effect June 1, 2024.
But double-digit rate hikes for dwelling policies have not found favor in the past.
“The last time the Rate Bureau made a dwelling rate filing was in August 2022, when it requested an average statewide increase of 42.6%. After negotiation, the Department of Insurance and the Rate Bureau reached a settlement for an overall average rate increase of 9.9%.”
The bureau’s request is unwelcome news for the real estate community in the Cape Fear region of New Hanover, Brunswick and Pender counties. One regional real estate leader called the prospect “quite concerning.”
“For many of the properties that are second homes, part of the economics of being able to afford those is renting them back and having some of that lease payment cover the mortgage,” said Steve Mitchell, this year’s president of Cape Fear Realtors. “Obviously with a big increase in insurance that may make that scenario unaffordable to them.
The rate bureau’s filing included information from Paul Ericksen, who leads the actuarial unit at Insurance Services Office (ISO) in Jersey City, New Jersey.
“ISO has provided actuarial consulting services to the Bureau on North Carolina dwelling rate filings since the Bureau was created,” Ericksen stated.
He said the approach in the filing “is consistent with prior property filings of the Bureau. Premiums should equal expected losses, plus expected expenses, plus a margin for a fair and reasonable profit. This is the fundamental insurance rate-making equation to comply with the statutory rate-making standard.
Additional testimony by Eriksen stated, “The indicated rate change is the actuarially sound percentage change necessary to make the rates comply with the statutory standards that they not be excessive, inadequate or unfairly discriminatory.”
Tyler Newman, CEO and president of Wilmington-headquartered business advocacy ground Business Alliance for a Sound Economy (BASE), criticized the rate bureau.
“Whether it is these proposed dwelling rates or homeowners rates, it seems like we are seeing astronomical requests every year from the Rate Bureau. Thankfully, the Insurance Commissioner [Mike Causey] has the ability (and has shown the initiative) to turn down outright these types of ridiculous potential increases,” Newman said in an email. “As a state, we would be better served to talk about comprehensive insurance reform versus the slow drip of requests from the Rate Bureau.”
People wanting to comment on the rate request have until Aug. 25 to do so. Emailed public comments should be sent to [email protected]