NC auto insurance overhaul proposal defeated

RALEIGH, N.C. (AP) -- Legislation to overhaul North Carolina's automobile insurance system was rejected Tuesday by a House committee after Insurance Commissioner Wayne Goodwin and other speakers argued it would raise premiums for everyone.

The House Insurance Committee turned down a motion to recommend the measure to the full House by a vote of 18-11. Watching the vote in the crowded committee room were lobbyists representing some of the largest insurance companies doing business in the state, which were divided on the issue.

The bill would have allowed individual insurance companies to lower or raise their own overall premiums by 7 percent annually, bypassing the current system in which the North Carolina Rate Bureau — representing all auto insurers — files one combined annual premium proposal to Goodwin's office. The measure also would have gradually ended an extra charge that all drivers must pay to make up for some motorists considered too risky to pay conventional rates.

The commissioner approves or rejects the Rate Bureau's rate requests. Goodwin said he would have a hard time stopping the individual rate requests allowed in the bill.

If the legislation were to pass, Goodwin told the committee, premiums "would have nowhere to go but up." While the current system isn't perfect, the commissioner said the proposed overhaul would "dismantle the system that works well for both drivers and insurers." He said North Carolina historically has ranked among the least expensive average premiums in the country.

A group of insurers led by national industry leader State Farm, along with Geico, Progressive and trade associations backed the bill. They've argued for years that the state's unusual regulatory structure has meant higher premiums for safer drivers while benefiting less-desirable drivers.

David Stoller is a lobbyist for State Farm and representative for Fair NC, an industry group seeking the changes. He called the plan "a very balanced step" that would align the true cost of covering the state's roughly 7 million insured personal vehicles with the premiums that are actually charged.

"This will lower the cost of insurance for 85 percent of the drivers, and for those who see an increase, that increase will only be a few dollars," Stoller said.

But Nationwide, North Carolina's market leader, N.C. Farm Bureau and AAA Carolinas won Tuesday's debate against drastic changes.

Bill opponents pointed to South Carolina, which they argued saw premium increases after they began using a plan similar to what was in the bill.

AARP state director Doug Dickerson said its 1.1 million older adults in North Carolina would be reminded of who voted for the changes if their insurance premiums rose. "They'll recognize that their clean driving record will be disregarded — no tickets, no DUI's, no accidents — but their rates will be rising without explanation," Dickerson said.

The bill's defeat means the N.C. Rate Bureau remains intact, but it doesn't resolve issues related to the N.C. Reinsurance Facility, where many of those with poor driving histories pay rates that are about 30 percent higher than conventional market rates.

The majority of the pool's population is made up of so-called "clean risks" who don't pay the higher rates but for other reasons are still considered too risky to pay the conventional rates.

Each insured driver in North Carolina pays a surcharge — on average about $12 per year — to cover the losses of the "clean-risk" motorists in the pool.

Fair Rate NC spokesman Bob Rosser said later Tuesday the group would still "push for commonsense reforms that prevent good drivers from being penalized by hidden fees and inflated rates."

Changes may ultimately come from two pieces of legislation scheduled for debate Wednesday in the Senate Insurance Committee. One would make it easier for insurance companies to offer optional coverages and discounts separate from the Rate Bureau procedure. Another measure would allow the age of young drivers to be a factor in setting rates.