Insuring a great state: a three part series on liability coverage in N.C.

Though rarely comprising a campaign soundbite, insurance regulations impact residents’ wallets every month.
Three sectors of statewide public policy could undergo major insurance reforms this year. In a three part series I’ll address challenges facing auto insurance, the Beach Plan and healthcare coverage in North Carolina.
Today I’ll explain how a hidden fee on auto insurance premiums and price mandates by state government are raising costs for most drivers.


Strict auto insurance regulations unique to N.C.

Competing bills in the General Assembly address North Carolina’s unique overregulation of automobile insurance. We are the only state to wield price setting authority over the cost of premiums. That control places a fee on 85% of policy holders to subsidize artificial rates for ‘clean risk’ drivers, usually teenagers and city dwellers.
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State Senator Bob Rucho (R-Mecklenburg) is one member advancing reform via S.B. 490. He says the fee, which cost drivers $900 million over the last five years, lacks transparency because it isn’t noted on financial statements. The revenue gain pays claims when clean risk drivers cause property damage or personal injury, covering for their low premiums.

That means insurance companies can’t raise appropriate revenue from higher risk drivers, rather they receive tax-and-spend assistance to cover their claims. Sen. Rucho argues eliminating the regulation won’t just cut that fee for drivers, it allows providers to earn market-driven revenue margins and offer lower premiums overall.

​Taxing insurance premiums statewide to benefit a small set of drivers fits the mold of socialist redistribution. Charging at-risk policy holders more isn’t discriminatory, it’s the business practice of actuaries and insurance companies nationwide.

​Department of Insurance Commissioner Wayne Goodwin, a former Democratic state representative, says providers could already offer lower rates if that was their intention. In his opinion, reform threatens our distinction as the cheapest state in the southeast to purchase auto insurance. We have the 8th lowest average premiums nationwide.

​There are two flaws in Commissioner Goodwin’s defense of his formidable authority. If providers are forced to price premiums below market assumptions and the government’s fee is reserved for paying claims, insurance companies can’t raise the revenue necessary to lower rates.

​Further, his argument that our average premiums are low compared to other states isn’t convincing when regulators set the price ceiling. These are common spins from interventionist governments.

Our average costs are relatively low because high-risk drivers pay more in other states instead of receiving price
protection from government fees. Most individuals in North Carolina will pay less when the fee is eliminated and insurance companies can offer lower premiums backed by free market revenues.


Bottom line

-​Most drivers would see lower costs with elimination of the government fee and return to a free market insurance exchange.

-There is heavy competition among auto insurance providers. They can’t raise rates unreasonbly without consequences from customers, so that’s an empty threat from bureaucrats clinging to control.

-Our distinction as the only state government using this practice warrants its reconsideration.

Thanks for reading.

http://www.thomgoolsby.com/2012/02/insuring-a-great-state-a-three-part-series-on-liability-coverage-in-n-c/