By CATHERINE KOZAK
The prospect of significant increases in homeowners’ insurance was tossed on public plates three days before Thanksgiving, and with the holiday season in full tilt, it took a while for people to notice. But a reprieve this week will allow anyone who owns a year-round home in Dare County to learn important details about potential steep hikes in their insurance bills.
On Jan. 8, N.C. Commissioner of Insurance Mike Causey rejected a proposed rate increase by the NC Rate Bureau that would have spiked homeowners’ insurance costs about 25 percent for Dare County – an average of 18.7 percent statewide – and set a hearing for July 23.
“After hearing and reading the more than 9,000 comments from residents across the state and studying the figures in the filing,” Causey in a statement, “it is now necessary to hold a hearing to reach a resolution that will make the most financial sense for our residents and insurance companies.”
Remarkable grassroots response accounts for the last-minute flood of comments, said Willo Kelly, government affairs consultant for the Outer Banks Association of Realtors and the government affairs director for the Outer Banks Homebuilders Association. Only four people – all opposed - spoke at a lightly-attended public comment session on the proposal held on Dec. 12 in Raleigh, she said. By then, a total of 94 comments had been received online by the department.
Issued on Nov. 17, the rate filing was more than 2,000 pages, Kelly said, and even she – someone who has been immersed in insurance issues for years – had a hard time making sense of it. But a close reading of the proposal in the two weeks after Thanksgiving, she said, revealed the extent of the disproportionate financial hit on homeowners in Eastern North Carolina. The proposed rate increase would affect fire and liability in homeowners’ insurance, as well as condominium and renters’ insurance. Wind insurance is covered in the separate Beach Plan, a mostly not-for-profit wind pool. And it would not affect second homes.
Kelly said that wind losses on the Outer Banks have been light, compared with flood, for a number of years – meaning that insurance companies have little reason to ask for higher profit margins. Also, the wind pool, which has a $1.8 billion reserve fund, has proven to be a successful approach to insuring against wind damage.
“The Beach Plan is a very good picture of (whether) we’re paying our fair share,” she said. “A very large percentage of the rate that we pay in homeowners’ insurance is for wind. We are more than paying our fair share.”
Insurance companies are also allowed to tack on additional fees to the rate without explanation, she says. And if a homeowner signs a “consent to rate” agreement – under threat of being dropped by the company – the rates can be jacked up as much as an additional 250 percent. (In that case, Kelly recommends shopping around for another company.)
But the Rate Bureau’s document is even worse than it appears, Kelly said. The actual filing shows a need for a 67 percent increase in the rate in Dare County, she said, but because of the extraordinary impact that would have, it was scaled back to a 25 proposed increase.
Considering the tremendous resulting jump in homeowners’ costs for even the lower amount, Kelly said that outreach and opportunity to discuss the proposed rate increase was very limited.
After the Rate Bureau issued the proposed increase on Nov. 17, the Department of Insurance announced the filing in a Nov. 20 press release. The department’s statement also notified the public of the Dec. 12 comment session, and that public comments would be accepted online through Dec. 29. But no link was provided for the 2,000-plus-page document for the public to open and review, Kelly said.
Kelly said that even a person like herself who deals with government documents all the time had to be walked through the Rate Bureau site online to find the proposal. And once she found it, there were no cross-references that normally are provided to help understand such a complex document. And no additional information beyond thepress release was distributed by the Insurance Department.
Not to mention that it was released at the start of the holiday season, when people are most distracted.
After absorbing the gist of the proposal, Kelly said she quickly launched an information blitz, getting the word out through the Outer Banks’ and statewide homeowner, real estate and building industry associations, town websites and numerous email lists. Kelly said she also went on Lockwood Phillips’ radio show Viewpoints a dozen times to discuss every aspect and update on the issue.
Now that the hearing has been set, she said, it is a matter of waiting. Department of Insurance, meanwhile, can do one of three things: negotiate a settlement with the bureau; do nothing and the rates can go into effect; or deny the filing and hold a hearing.
“I’m expecting a negotiated settlement,” Kelly said, “because a hearing is time-consuming and it’s expensive. It’s a lengthy process.”
A hearing on proposed rate changes was held in 2014, for instance, but it wasn’t until 2016 that the state’s appellate court ruled in favor of the insurance department.
Lawmakers need to hear from their constituents, Kelly said.
“The public needs to be more engaged,” she said. “We are certainly outnumbered by lobbyists in effecting change in the insurance industry.”
And Kelly isn’t even talking about federal flood insurance – a whole other can of worms.
“We’ve got another week before the extension runs out on Jan. 19,” she said.
Congress is likely to extend the Federal Emergency Management Agency program to the end of the fiscal year on June 30, she said, when debate will resume under the heat of looming mid-term elections.
“It is unconscionable that the flood insurance program is in the state it’s in,” Kelly said.