A bill designed to make the state’s ratemaking process for homeowners insurance more transparent and more understandable has been tweaked to address issues raised by industry and the state Insurance Department.
One of the primary sponsors of HB 519, Rep. Paul Tine, a Democrat from Kitty Hawk, suggested the amended version that was adopted by the House Insurance Committee on Tuesday. The bill, which has bipartisan support, wasn’t put up for a vote.
Lurking in the background is simmering resentment among coastal residents, whose homeowners insurance premiums have been rising steeply — and, many say, unfairly. The industry contends that the specter of catastrophic damages from hurricanes justifies the increases, which were approved by state regulators.
The original bill was interpreted as requiring the N.C. Rate Bureau, which represents the insurance industry on rate issues, to use at least two computer models to calculate potential losses from hurricanes and other catastrophes. Computer models are no longer required under the amended bill, but if the Rate Bureau chooses to use a computer model it must use more than one.
The state Insurance Department had objected that although it currently considers computer modeling in ratemaking, it’s just one of many factors. Mandating the computer models could have proven sticky for state regulators if a rate dispute ended up in court, said Bob Mack, deputy commissioner for property and casualty.
Using more than one computer model is desirable, Tine said, because each model uses different assumptions. The bill also stipulates specific data that must be included in the models.
Critics along the coast have complained about the computer models adopted by the industry for past rate requests.
The bill as amended also backs off from instituting a new two-tiered rate system for homeowners insurance, which triggered objections from industry. Instead, the bill requires insurance companies to include in their premium notices to consumers a breakdown of the amount of the premium that stems from insuring against wind and hail damage and how much is related to coverage for fire, theft and other claims.
The bill also requires each industry rate request to include historical data dating back to 1987, broken down by territory, for losses arising from hurricanes. That provision, said Tine, aims to be an antidote to the different data currently cited by different groups in the debate over homeowners insurance rates.
Staff writer David Ranii