A bill that would create an independent authority to finance excessive costs related to catastrophic hurricanes is awaiting action in the Senate Insurance Committee. The bill’s primary sponsors include Rep. Chris Millis, R-Pender, who says the bill also would give policyholders clearer information about rate increases.
Among the major concerns of homeowners’ advocates is a loophole in state law that permits insurance companies to get around rate limits set by the insurance commissioner. The consent-to-rate provision allows insurers to require homeowners to agree to rates up to 250 percent above the state-approved rate or risk cancellation of their policy.
House Bill 182 would not prevent this practice, but it would require the companies give at least 30 days’ notice to allow customers to shop around for new coverage if desired.
It would require the rate be explained in clear terms that must include the percentage difference between the company’s proposed rate and the rate approved by the insurance commissioner.
“I felt like what came out of the end product is very positive,” Millis said. The goal of Millis and the other sponsors was twofold: first, add some protections for policyholders and second, create reforms to encourage insurers to conduct business in North Carolina.
One thing Millis did not want to see was insurers to cancel policies or pull out of the state because of legislative reforms.
The bill calls for the formation of the N.C. Recovery Finance Authority, which would be empowered to issue bonds if the costs from a storm exceeded the amount in the state insurance pool, the industry assessment of $1 billion and reinsurance.
To repay the bonds, North Carolina policyholders could be assessed up to 10 percent on their premiums. The current law also provides for sharing the burden across the state.
A bill sponsored by Sen. Michael Lee, R-New Hanover, would eliminate the consent-to-rate provision. Lee’s bill is also awaiting action in the Senate Insurance Committee. Hearings have not been scheduled on that bill, Senate Bill 683, or HB 182.
Millis said he had been focused on getting his bill, which addresses the insurance issue from a much broader angle, through the House. But he said he would be willing to look at other legislators’ ideas if they would help achieve what the bill intends.
For his part, Lee said he still hopes to see his provision become law.
“I am pushing hard to get consent to rate repealed,” he said.
Lee hasn’t yet talked at length with Senate leaders about the proposal, and he said he would be willing to consider modifications to his proposal, such as cutting the percentage by which companies may exceed the state-approved premiums.
But he said he supports, as Millis’ bill does, a legislative study of the ratemaking process in North Carolina, which is unlike any other state. Millis’ bill would require a committee to recommend ways to improve the system.
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