INSURANCE CONTROVERSY RESOLVED
As you may recall, earlier this year there was quite a controversy concerning changes in homeowner insurance rates, deductible amounts, and surcharges that the North Carolina Insurance Commissioner approved for policies written in the coastal counties. Thanks in large measure to the combined efforts of the Dare County Attorney and the Government Affairs Director for the Outer Banks Association of Realtors, the changes which unfairly penalized coastal county home owners were modified by the state legislature and approved by the Governor in late August.
The Beach Plan, which is a pool of private insurance companies that write policies throughout the state, is the primary source of property insurance coverage on Hatteras Island and in 18 North Carolina coastal counties. The main concerns about changes in the Beach Plan and the revisions that were adopted are as follows:
· The Beach Plan policy deductible for wind damage (the amount that the homeowner must pay out-of-pocket before insurance coverage kicks in) would have increased from a flat rate deductible to 2 percent of the home’s value as stated in the policy with a minimum deductible of $1,000 on a per occurrence basis. In the revised version, the deductible was cut to 1 percent of the home’s value with a minimum deductible of $1,000 on a per occurrence basis.
· The Beach Plan is allowed to charge higher rates than private insurance companies for the coverage that it provides. This additional cost is called a surcharge. Surcharges for full peril coverage (the majority of policies) were scheduled to increase from 115 percent to 125 percent of the comparable private market insurance rate. The surcharge for policies that provide only wind coverage would have increased from 105 percent to 115 percent. The surcharges in the final bill were left unchanged at 115 percent for full coverage policies and 105 percent for wind only coverage.
· To assure that the Beach Plan has enough funds available in the event of a catastrophe, a provision was added that excluded insurance for homes valued at more than $750,000 unless coverage for the amount in excess of $750,000 is purchased from a private carrier prior to the issuance of a Beach Plan policy.
· In a separate action, a rate increase of 6.5% approved by the North Carolina Rate Bureau for non-Beach Plan homeowner’s insurance policies bought in Dare County remained unchanged after unsuccessful litigation was filed to stop the increase.
Apart from the specific changes noted above, we think that one of the most important aspects of the legislation was that it represented recognition on the part of the North Carolina legislature that decisions about insurance should acknowledge that the different geographic regions of the state are interdependent when disasters strike rather than each region being viewed in isolation from the others.