Editor’s Note: This settlement is in relation to a January 2011 rate filing for dwelling fire and extended coverage rates; it is unrelated to and should not be confused with the October 2012 homeowners insurance rate filing.
Nov. 28, 2012. Insurance Commissioner Wayne Goodwin has signed a settlement agreement with the insurance companies in the matter of a rate revision for dwelling insurance. The agreement allows for a statewide average increase of 13.2 percent for dwelling fire and extended coverage policies, spread over a three-year period.
The insurance companies, represented by the North Carolina Rate Bureau, requested an overall statewide average increase of 20.5 percent, varying by coverage and territory, in January 2011. The difference between the requested and settled rate increase represents approximately $54.4 million in savings for policyholders over four years.
Prior to this settlement agreement, the insurance companies were in the process of appealing to the North Carolina Court of Appeals a 2011 decision by Goodwin that ordered a small decrease in dwelling rates.
“It became apparent that if we continued to fight this issue in court, there was too great a risk that dwelling policyholders would receive much larger increases, particularly on the coast. This agreement allows for a smaller total increase spread over three years to lessen the impact on policyholders,” said Goodwin.
“The decision to settle on these rates was not taken lightly,” Goodwin added. “In recent years, more and more insurance companies have been dropping or refusing to offer these policies. Genuine concerns about insurance availability were also a factor in arriving at this settlement.”
The last rate increase for dwelling insurance went into effect in 2006.
About Dwelling Property Insurance
Dwelling insurance policies are not homeowners insurance policies; dwelling policies are offered to non-owner occupied residences including rental properties, investment properties and other properties that are not occupied full-time by the property owner. They offer fewer coverage options and are sold to cover properties that would not qualify for a standard homeowners policy.
Dwelling policies typically consist of two parts: the fire portion of the policy covers damage caused by fire; the extended coverage portion of the policy generally covers damage caused by wind, hail, fire, smoke, riot, civil commotion, and aircraft and vehicle damage.
In North Carolina, there are approximately 400,000 properties covered by dwelling insurance, compared with more than 2.2 million covered by homeowners insurance, which are not part of this settlement.
Details of the Settlement
In reaching a statewide average increase of 13.2 percent for dwelling property insurance, the settlement provides that:
· An average 4.7 percent rate increase, varying by territory, will be applicable to new and renewal policies effective March 1, 2013.
· An average 5.7 percent rate increase will be applicable in all territories for new and renewal policies effective March 1, 2014.
· An average 2.4 percent rate increase will be applicable in all territories for new and renewal policies effective March 1, 2015.
Read the full settlement here: www.ncdoi.com/Media/Documents/11-27_DwellingRatesSettlementAgreement.pdf.
Jan. 4, 2011: The insurance companies, represented by the North Carolina Rate Bureau, requested an overall average rate increase of 20.5 percent for dwelling property insurance rates, varying by coverage and territory in the state. The 20.5 percent average increase included a requested 7.3 percent decrease for the fire portion of dwelling policies and a requested 36.1 percent increase for the extended coverage portion.
Jan. 4-31, 2012: A public comment period was held. More than 850 comments on the filing were submitted by members of the public.
Feb. 21, 2011: Insurance Commissioner Wayne Goodwin issues a notice of hearing for the rate filing.
Dec. 9, 2011: After a hearing that began July 25, 2011, and ended Oct. 25, 2011, Insurance Commissioner Wayne Goodwin issued an order granting the requested overall 7.3 percent rate decrease for the fire portion and denying the request to increase the extended coverage rate. The North Carolina Rate Bureau appealed the Commissioner’s order to the North Carolina Court of Appeals.
May 1, 2012: A statewide average rate decrease of 7.3 percent for the fire portion of dwelling insurance policies went into effect. No rate changes were implemented for the extended coverage portion. Court of Appeals procedures continued.
Nov. 26, 2012: Commissioner Goodwin and the Rate Bureau signed a settlement agreement allowing an average 13.2 percent increase for dwelling rates to be spread over three years, the first known time in the state that an insurance increase was to be effective gradually.