Homeowners Insurance

Homeowners Insurance Policy

Previously reported – January 2022
NC Homeowner’s Insurance Rate Settlement Only A Partial Victory
Homeowners in Carteret and the other 19 coastal counties received good news in late November with the announcement that North Carolina Insurance Commissioner Mike Causey denied a proposed insurance premium increase that would have raised homeowner’s insurance up to 25% and instead negotiated a rate increase that tops out at 9.9%. While this is good news for local homeowners as well as those across the state, it raises concerns that need to be addressed.
Due to the importance of homeowner’s insurance, and the fact that it is a necessity for home mortgages, there needs to be greater transparency on the part of insurance companies providing claim details so that the public better understands the justification. And, in the cases of a rate settlement such as announced last month by Commissioner Causey, there needs be more disclosure about the process and the arguments used that resulted in the new premium charges. In mid-November of 2020, the N.C. Rate Bureau (NCRB), a legislatively created department tasked with assuring accuracy of insurance rate administration and to represent those agencies licensed to operate in the state, presented a premium increase to the state’s Department of Insurance (DOI) for homeowner’s insurance that averaged 24.5% statewide. In making the rate request, the rating bureau stated that because of an increased number of insurance claims over the preceding years a much high rate was justified to assure the solvency of the requesting companies. But out of the apparent concern for the financial impact of even higher rates, the NCRB and its members proposed only a 24.5% increase. Keep in mind this was an average increase. The state is divided into 29 territories and each territory carries a specific risk rating, with the coastal region and a few mountain regions carrying the highest risk rating. Because the 20 coastal territories are considered to have the highest risk of claims due to hurricane exposure, insurance premiums for that region of the state were facing premiums increases as high as 25% while other territories were scheduled for single digit increases. Public notice of this 2020 rate proposal was disseminated by Commissioner Causey in a two-page press release to newspapers and broadcast media. Because the notice was sent out a week before Thanksgiving, the traditional beginning of the Christmas season, most newspapers and the few broadcast media that cared enough to read the new release provided only cursory coverage. The public notification of this proposal was extremely short on both time allotted for public comment, one month, and equally short on information about the reason for the increase. The only explanation provided in Commissioner Causey’s release was “one of the drivers behind this requested increase is that North Carolina has experienced increased wind and hail losses stemming from damaging storms.” There is no mention of what storms were the cause nor any indication as to the losses suffered, nor did it mention that there was an extreme disparity of rate changes, with the coastal region experiencing the highest rate increases in all categories. Anyone interested in the details of the rate increase needed to go to the Rate Bureau’s website which is not part of the state’s DOI website and then attempt to comprehend the two-part, two-thousand-page filing. The NCDOI website had few details about the filing and only provided information for making comment or participating in a “virtual meeting.” Late last month, almost a year to the day after the initial rate increase request, Commissioner Causey announced that he and the rate bureau had settled on an increase that caps premium increases to 9.9% for the areas designated as high risk and 5.5% for other territories, which results in a statewide average of 7.9%. In making the announcement about the recent settlement, Mr. Causey stated, “I am happy to announce that North Carolina Homeowners will save over $751 million in premium payments compared to what the NCRB had requested. I am also glad the Department of Insurance has avoided a lengthy administrative legal battle which could have cost consumers time and money.” There is no question that homeowners, condominium owners and apartment renters in the 20 coastal counties are far better off now that Mr. Causey has negotiated the proposed 25% premium insurance increase down to only 9.9%. But still, the public has been kept in the dark about the process and reasoning behind both the original requested premium hike and now the settlement. Considering the complexities of the insurance rate proposal and the expansive requirement of insurance for property ownership, it stands to reason that the NCDOI should do more to inform and educate the public. Simply announcing that a rate increase has been proposed with little, very little, explanation and then to provide only one month to understand and research the facts provided is unfair to the public. It is worth noting that this proposal, like four other previous proposals, came during the holiday season when the general population was focused on the Christmas season. The 2020 requested premium increase is particularly onerous as the nation and state recover from the economic impacts of the Covid-19 pandemic and rapid out-of-control inflation. Commissioner Causey and the legislature should establish the same procedures utilized by the N.C. Utilities Commission. Utility companies licensed to provide electricity and gas services in the state, like the insurance industry, must seek approval for all rate increases or adjustments in service. In those cases, the utility company requesting a rate or service change must present documentation for the changes to the state’s Utilities Commission. The commission then conducts public witness hearings in several towns affected by the rate or service proposals. Following those meetings, the commission then conducts an expert witness hearing and from both the public forums and more comprehensive hearings, the commission’s staff makes a report for the Utilities Commission’s final decision. Mr. Causey’s announced rate reduction is only a partial solution. Recent news reports noting that home insurance is rising faster than inflation should cause even greater concern for homeowners, spurring Commissioner Causey and the legislature to improve public disclosure and more transparency in the process.
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Previously reported –July 2022
Home insurance costs nearly double due to inflation
Inflation has affected nearly every aspect of life, from food, to gas, to labor. Now, homeowners could see those costs reflected in their insurance premiums. “It’s the first time in my lifetime, that I’ve seen inflation at such a high level and at such a fast rate,” said North Carolina Coastal Insurance owner, Hernan Lois. According to Lois, the average homeowner will pay 30 to 40 percent more for homeowners insurance this year because of inflation raising property values, labor prices, and building supply costs. According to builder, Neil Sims, the average OSB board (one of the most common materials home builders use) used to cost around eight dollars apiece. Just recently, that cost reached the mid 30-dollar range. “The prices… the labor prices and material prices have significantly increased. So, because you could build a house for 200,000 dollars five or 10 years ago, does not mean anything anymore,” Sims explained. And with the height of hurricane season quickly approaching, insurance expert Hernan Lois says it’s more important than ever to update your coverage. “The reality is,” Lois continued, “you want to make sure you have full replacement value because if something were to occur, you want to be made whole.” Lois says total losses happen more often than you’d think. Being underinsured can be a disaster in itself. “Well ultimately out of pocket expenses. It means that they would have to pay for all of the additional reconstruction costs or possibly to their contents coverage. Their loss of use coverage, which is their living expenses while their home is being rebuilt,” said Lois. Though he opted for more coverage, Wilmington resident Dennis Mauger says his insurance went up 600 dollars a year. It was a tough financial pill for the retiree to swallow. “We had a house fire a couple years back and thank goodness we had good coverage on insurance replacement costs. I understand the value of insurance, it’s just hard to, if it’s the year that you’re not using it to absorb those costs,” Mauger said. When a storm system is named and predicted to come to our region, insurance companies can bind policies, keeping homeowners from changing their coverage plans.
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Previously reported –May 2022
Your Homeowners’ Insurance Bill Is the Canary in the Climate Coal Mine
If you don’t think you’ve been affected by global warming, take a closer look at your last homeowners’ insurance bill: The average cost of coverage has reached $1,900 a year nationwide, but it’s $4,000 a year in New Orleans and about $5,000 a year in Miami, according to Policygenius, an online insurance marketplace. And that is pocket change compared with the impact climate change may ultimately have on the value of your home. We have reached a turning point: Climate risk is driving insurer decisions like never before. After recent years of paying out claims for about 20 disasters a year with damages of over $1 billion, a sixfold increase from the 1980s, insurers are getting serious about new pricing models that incorporate the costs of a warming climate. Across the United States, premiums jumped 12 percent from 2021 to 2022, according to Policygenius estimates, and they are expected to continue to rise. Even with higher premiums, unpredictable losses are wreaking havoc on insurers’ bottom lines. Ten insurers have gone belly up in Florida in just the last two years. And in many cases, insurers are pulling back in risky areas, leaving state-backed insurance plans holding the bag. Both private and government-backed insurers are undercapitalized for dealing with the potentially massive disasters we could be facing in coming years. This shortfall foreshadows more premium increases, which will drag down house prices. And losses will not be borne by those residing in higher-risk areas only; they will be borne by policyholders everywhere. Thus far, housing markets have largely managed to ignore these potential exposures. Over the last three years, home prices are up around 37 percent nationwide. They are up even more in parts of Florida and the Southwest that are predicted to suffer significant impacts from a warming climate. Take Phoenix, which, by 2060, is forecast to endure 132 days each year with temperatures of over 100 degrees. Last summer, the water level in Lake Mead, a critical source of water for 25 million people in the Southwest, reached its lowest level since the reservoir was filled in 1937. And living in Phoenix requires energy-intensive amenities like air conditioning, which worsen these consequences. Yet Phoenix home prices are up 53 percent since January 2020. Why are so many home buyers putting themselves in harm’s way? The simplest explanation is that they are choosing to focus on the short-term benefits of sunny weather rather than the longer-term problems. A defining feature of the pandemic housing boom has been Americans, particularly retirees, moving southward. And with about 10,000 Americans turning 65 each day, this pattern could continue for years to come. It’s hard to make decisions based on things we haven’t experienced. But by ignoring the growing consequences of climate change, we are investing too much in potentially hazardous areas in a way that’s hard to unwind. In 50 years, the result could be miles of unlivable homes along waterfronts and in deserts. The financial consequences of these choices will be enormous, causing ripple effects through insurance markets and ultimately undermining home values. Climate risks are difficult to forecast and are increasingly correlated: From insurers’ perspectives, it’s “Everything Everywhere All at Once,” with heightened risks of floods, droughts, wildfires and more. To have the necessary buffer to pay out claims after catastrophic losses, insurers will need more reserves and more reinsurance, and they will pass those costs on to policyholders in the form of higher premiums. That includes policyholders who live well out of harm’s way. The year after the Marshall fire destroyed over 1,000 homes and caused over $2 billion in damage near Boulder, Colo., average premiums rose over 17 percent statewide. While insurers can choose to stop offering insurance, the homeowners and governments they leave behind will still have to deal with the risks. And as the costs go up, more households may decide to reduce their coverage or may choose to go without insurance entirely. It’s estimated that only one-third of households in flood zones have flood insurance — with many risking financial ruin if the “big one” hits. Then there’s the housing market. There is $30 trillion in housing equity in the United States, and the most important source of wealth for most American households is the home. If homeowners have to pay more in premiums, can’t obtain insurance at all or can’t find buyers because of fears about climate change, property values can erode or collapse even without a hurricane making landfall. This dynamic has already started: My research partner Philip Mulder and I found that low-lying housing markets in coastal Florida began to price sea level risk in the 2010s, leading to a roughly 5 percent discount relative to houses in similar, but less exposed, communities. Climate risks are disproportionately borne by lower-income groups and racial minorities, who may already live in riskier areas, are less likely to be insured, and may lack access to resources for pre-disaster preparation or post-disaster repairs. As some private insurers retreat from higher-risk areas, state-backed “insurer of last resort” plans are stepping into the void. The number of enrollees in these state-backed plans rose by 29 percent between 2018 and 2021. These plans are often more expensive, they offer less coverage than private insurance options, and they face the same concerns as private insurers about their ability to pay out in the event of a crisis without burdening policyholders statewide. What can be done? The government needs to ensure that insurers, both public and private, are sufficiently capitalized to withstand significant climate-related risks. One way to start is by instituting “stress tests” for housing and property markets against climate risk. As the recent experience of Silicon Valley Bank has taught us, the balance sheets of players in the market may be weaker than previously believed, given recent swings in interest rates. If balance sheets can’t cover the losses, either claims go unpaid, or the broader population is on the hook for the difference. These stress tests should consider not only a severe natural disaster scenario, but also a sharp “revaluation” event responding to a change in climate forecasts. How would coastal housing markets respond to news that ice sheets were melting faster than anticipated, leading to more rapidly rising seas? Current homeowners and those shopping for a house need to wake up. Some will undoubtedly dismiss these risks, reasoning that the impact is likely to be “beyond their investment window.” In making that assumption, however, they are ignoring that when they sell their home, they will need to find a buyer willing to bear the uncertainty. Other homeowners prefer to avoid publicizing risks that could harm their property value, abetted by uneven disclosure requirements across states. Right now, those of us who elect to live in safer communities are quietly subsidizing those who do not. Homeowners who move to areas that are likely to be significantly impacted by climate change should pay for the potential risks they are assuming. One way to do that would be to have Fannie Mae and Freddie Mac incorporate climate risk into their pricing models. If you want to buy a waterfront home on Siesta Key, Fla., you will pay a higher interest rate on your mortgage, a surcharge you could reduce by climate-proofing your home. Note, however, that most climate proofing won’t help if, as scientists predict, the home is literally underwater. The government should manage expectations through better disclosure and better assessment of climate perils. An easy first step would be to make detailed risk data more accessible and interpretable. Potential property owners deserve loud and crystal-clear warnings of climate-related risks, especially if prices are not yet providing a sufficient signal on their own. Private insurers are sending a warning signal about heightened climate risks that homeowners and potential buyers need to receive. Insurers’ decisions are leaving households with fewer choices, less protection, and more financial distress. Homeowners should understand the potential hazards and find the right insurance policy or policies to protect them from harm. And they need to be aware that the costs of living in harm’s way are going to rise in coming years. An era of complacency is ending. If you decide to buy that condo where you can hear the ocean’s waves, realize that you are likely to pay more for that privilege — one way or the other.
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Previously reported –May 2022
Home insurers cut natural disasters from policies as climate risks grow
Some of the largest U.S. insurance companies say extreme weather has led them to end certain coverages, exclude natural disaster protections and raise premiums
In the aftermath of extreme weather events, major insurers are increasingly no longer offering coverage that homeowners in areas vulnerable to those disasters need most. At least five large U.S. property insurers — including Allstate, American Family, Nationwide, Erie Insurance Group and Berkshire Hathaway — have told regulators that extreme weather patterns caused by climate change have led them to stop writing coverages in some regions, exclude protections from various weather events and raise monthly premiums and deductibles. Major insurers say they will cut out damage caused by hurricanes, wind and hail from policies underwriting property along coastlines and in wildfire country, according to a voluntary survey conducted by the National Association of Insurance Commissioners, a group of state officials who regulate rates and policy forms. Insurance providers are also more willing to drop existing policies in some locales as they become more vulnerable to natural disasters. Most home insurance coverages are annual terms, so providers are not bound to them for more than one year. That means individuals and families in places once considered safe from natural catastrophes could lose crucial insurance protections while their natural disaster exposure expands or intensifies as global temperatures rise. “The same risks that are making insurance more important are making it harder to get,” Carolyn Kousky, associate vice president at the Environmental Defense Fund and nonresident scholar at the Insurance Information Institute, told The Washington Post. The companies mentioned those policy changes as part of previously unreported responses to the regulatory group’s survey. The survey was distributed in 2022 by 15 states and received responses — some sent as recently as last month — from companies covering 80 percent of the U.S. insurance market. Allstate said its climate risk mitigation strategy would include “limiting new [auto and property] business … in areas most exposed to hurricanes” and “implementing tropical cyclone and/or wind/hail deductibles or exclusions where appropriate.” Nationwide has already pulled back in certain areas. The company said that in 2020, it “reduced exposure levels in some of the highest hazard wildland urban interface areas in California.” In its response to the regulators’ survey, Nationwide said it no longer underwrites coverage for “properties within a certain distance to the coastline” because of hurricane potential. Other changes will come. “More targeted hurricane risk mitigation actions are being finalized and will start by year-end 2023,” Nationwide told regulators. Berkshire Hathaway, which also offers reinsurance — insurance policies for insurance providers — wrote that increased climate disasters mean “it is possible that policy terms and conditions could be updated or revised to reflect changes in such risk.” U.S. homeowners have faced unprecedented disasters in recent weeks that have underscored the new challenges facing insurance markets. Hurricane Idalia brought severe flooding to Georgia and the Carolinas and tore through parts of Florida that had never experienced direct hits from a major storm. Tropical Storm Hilary caused $600 million in damage on the West Coast, according to Karen Clark & Co., a leading catastrophe modeling firm. The fires on the Hawaiian island of Maui, whose cause is still under investigation, led to $3.2 billion in property damage, the firm said. Those catastrophes, insurance industry insiders said, show just how quickly claims costs are escalating in the face of climate change. U.S. insurers have disbursed $295.8 billion in natural disaster claims over the past three years, according to international risk management firm Aon. That’s a record for a three-year period, according to the American Property Casualty Insurance Association. Natural catastrophes in the first six months of 2023 year in the United States caused $40 billion in insured losses, the third costliest first-half on record, Aon found. “There’s no place to hide from these severe natural disasters,” said David Sampson, president of the American Property Casualty Insurance Association. “They’re happening all over the country and so insurers are having to relook at their risk concentration.” That trend is too costly, insurers contend, and necessitates rewriting policies or eliminating coverages in growing geographic areas. Rate increases for homeowners insurance are regulated by state agencies. “That can prevent firms from pricing policies that accurately reflect risk,” said Daniel Schwarcz, who studies insurance markets at the University of Minnesota Law School. Instead of setting much higher prices for policies in specific areas that might be more vulnerable — such as regions below sea level or on the edge of fire-prone areas — insurance firms must set prices that are relatively comparable across an entire state. “We’re in the business of pricing to risk,” Matt Mayrl, vice president of strategy, performance and partnerships at American Family Insurance, said in an interview. “Sometimes your price can’t match your risk.” Many of the policy changes, experts say, may be unfavorable to certain consumers but are important for the survival of the wider insurance market. Typical home insurance policies cover damage from all manner of perils, including fire and smoke, wind and hail, plumbing issues, snow and ice, and vandalism and theft. Floods are generally covered by a separate federally administered program. Under the policy changes many large insurers are reporting to regulators, firms will continue to offer baseline policies to clients in disaster-prone areas, but without protections for damage caused by those disasters. For example, a policy in a region afflicted by hurricanes may exclude coverage for wind or hail damage, or in wildfire country, a policy without fire and smoke protection. Consumers who want those coverages would need to purchase a supplemental policy or shop for insurance from another provider. “The fact that insurers have the capacity to limit their exposure or change their exposure over time means at the end of the day their concerns are not fully aligned with the concerns of their policyholders,” Schwarcz said. Representatives from Allstate and Erie declined to comment. Berkshire Hathaway and Nationwide did not respond to requests for comment. Insurance markets, especially those that serve many regions across the country, rely on relatively stable risk projections when it comes to natural disasters. By balancing wildfire risk during the late spring in the Pacific Northwest with hurricanes in the early fall in the Southeast and winter storms in the Upper Midwest, insurers can spread risk across constituencies. In theory, providers can collect monthly premiums from a broad clientele without paying out claims on too many large-scale disasters at once. But weather patterns are changing as the planet warms. “There is no wildfire season anymore — it’s year-round,” said Sampson, who is also a member of President Biden’s Wildland Fire Mitigation and Management Commission. Major hurricanes are becoming more frequent and hold more intense rains, said Paulo Ceppi, a climate scientist at Imperial College London. Meanwhile, “tornado alley” — an area swarmed by twisters that runs from Texas and Oklahoma through Kansas and Nebraska — is moving east, according to 2018 and 2022 research published in the journals Nature and Environmental Research Communications. The variability in weather patterns means insurance companies can no longer rely on the previous risk projections that helped them make decisions. “Potential changes to the frequency and/or severity of weather-related catastrophic losses pose a risk in both the short and long term,” Nationwide wrote in its survey response. “Activity has been observed in recent years that has differed from historical norms or modeled expectations.” As insurers leave certain markets or cut certain perils out of policies, some homeowners are going without insurance. State governments have erected insurance policies of last resort. The taxpayer-backed Citizens Property Insurance in Florida was the state’s second-largest insurer in 2021 in terms of policies written, according to the Insurance Information Institute. Fourteen insurance firms have either left Florida as of April or have policy portfolios that are failing. Farmer’s, the fifth-largest homeowners’ insurance provider in the United States, said in July that it would not renew nearly a third of its policies in the Sunshine State. A state-backed policy in California, where State Farm and Allstate have withdrawn or significantly cut back on new policies, covers 3 percent of residents. But even state-backed policies must face climate risks. “When you see the insurance companies pulling out en masse because the cost of rebuilding homes in Florida is bankrupting them,” said Ben Jealous, executive director of the Sierra Club, “it’s either hubris or folly to think the state wouldn’t be bankrupted stepping in to help.”
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Previously reported – January 2024
Insurance firms seek 42% rate hike for NC homes with 99% increase at coast
Insurance companies are seeking a more than 40 percent average rate increase for coverage of homes in North Carolina with much higher rates sought at the coast, according to a Friday news release from the North Carolina Department of Insurance. The North Carolina Rate Bureau, which represents companies that write insurance policies in the state, is requesting a 42.2 percent rate increase for homeowners’ insurance, the news release said. The highest rate increases — at 99.4 percent — would essentially double costs for homeowners in beach areas in Brunswick, Carteret, New Hanover, Onslow, and Pender counties, the news release indicated. Insurance companies are seeking a 39.8 percent hike for homes in Durham and Wake counties, including Raleigh and Durham. Under the proposal from the insurance companies, the rate hike would go into action on Aug. 1. An earlier rate increase request for homeowners insurance from the bureau in November 2020 was for an average hike of 24.5 percent in North Carolina. However, after a settlement with the North Carolina Department of Insurance, the overall rate increase ended up being 7.9 percent, the news release said. A public comment period is required by law to give the public time to address the proposed 42.2 percent rate increase. All public comments will be shared with the North Carolina Rate Bureau. If North Carolina Department of Insurance officials do not agree with the requested rates, the rates will either be denied or negotiated with the North Carolina Rate Bureau. If a settlement cannot be reached within 50 days, Department of Insurance Commissioner Mike Causey will call for a hearing. 

Below are the ways to provide public comments:

• • A public comment forum will be held to listen to public input on the North Carolina Rate Bureau’s rate increase request at the North Carolina Department of Insurance’s Jim Long Hearing Room on Jan. 22 from 10 a.m. to 4:30 p.m. The Jim Long Hearing Room is in the Albemarle Building, 325 N. Salisbury St., Raleigh, N.C. 27603.
  • A virtual public comment forum will be held simultaneously with the in-person forum on Jan. 22 from 10 a.m. to 4:30 p.m. The link to this virtual forum will be: https://ncgov.webex.com/ncgov/j.php?MTID=mb3fe10c8f69bbedd2aaece485915db7e
  • Emailed public comments should be sent by Feb. 2 to an email at [email protected].
  • Written public comments must be received by Kimberly W. Pearce, Paralegal III, by Feb. 2 and addressed to 1201 Mail Service Center, Raleigh, N.C. 27699-1201.

A more detailed breakdown of the list by zip codes for some areas is available from the North Carolina Department of Insurance by clicking here (pdf document).

 Territory 140 / Eastern Coastal areas of Brunswick County zip code 28462

NCRB proposed increase 71.4%

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Previously reported – November 2020
Insurance companies request rate increase for homeowners
The North Carolina Rate Bureau (NCRB) has requested a 24.5 percent statewide average increase in homeowners’ insurance rates to take effect August 2021, according to a news release issued Nov. 10 by state insurance commissioner Mike Causey. The NCRB is not part of the N.C. Department of Insurance but represents companies that write insurance policies in the state. The department can either agree with the rates as filed or negotiate a settlement with the NCRB on a lower rate. If a settlement cannot be reached within 50 days, Causey will call for a hearing. Two years ago, in December 2018, the NCRB requested a statewide average increase of 17.4 percent. Causey negotiated a rate 13.4 percentage points lower and settled with a statewide average rate increase of 4 percent. One of the drivers behind this requested increase is that North Carolina has experienced increased wind and hail losses stemming from damaging storms. A public comment period is required by law to give the public time to address the NCRB’s proposed rate increase.
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Sticker shock: NC’s insurance companies want to raise rates for coastal homeowners by 99%
Living along the coast could be about to get more expensive if the state’s insurance industry has its way. Blame increased risk from climate change and surging coastal property values
The proposed increases are eye watering. The N.C. Rate Bureau, which represents the insurance industry in the Tar Heel State, has asked state regulators to approve a massive increase in homeowner insurance rates. How big? Well, the increase would average out to about 42% statewide. But that figure, as large as it is, doesn’t encompass the hit some property owners would take, especially along the coast. Here’s a look at how badly coastal homeowners could be hit by higher insurance rates, what’s behind the industry’s logic for proposing such massive increases, and what rate hikes are consumers really likely to see.

Sticker shock
The proposal would hammer property owners in coastal areas of the Cape Fear region. The bureau has proposed an increase of 99.4% for beachfront properties in New Hanover, Brunswick and Pender counties in the Wilmington area and Carteret County, which includes Emerald Isle. Farther up the N.C. coast, beach areas along the Outer Banks would see a 45% increase. Areas on the mainland but near the Intracoastal Waterway in the Wilmington area would see proposed increases of 71.4% for those roughly from U.S. 17 oceanward and 43% for those farther inland. The increases would be determined by a property’s ZIP code. Proposed increases in the rest of the state also would be substantial, but not as much as a gut punch for coastal homeowners in Southeastern North Carolina. In coastal areas between Morehead City and the Virginia state line, most policies would jump by roughly 25%. Farther inland, Duplin and Lenoir counties would see rates go up 71%, while Triangle homeowners would see a price increase of nearly 40%. The proposed increases around Charlotte and Asheville would be 41% and 20%, respectively. The new increase comes a little over three years after the insurance industry requested an overall average increase of 24.5%. That filing resulted in a settlement between insurers and the state for an overall average rate increase of 7.9%.

Why hit the coast so hard?
Industry officials say a lot of factors are at play that’s making insuring properties at the coast more risky and less profitable. Near the top is the inherent uncertainty and increased risk brought on by climate change. The warming weather is allowing bigger and more powerful hurricanes to threaten coastal areas up and down the U.S. Gulf and East Coasts. The changing climate, which means tropical systems can hold more moisture, travel farther inland, and threaten areas farther north, is also expanding the traditional hurricane season into the early spring and early winter periods. Flooding woes also are widening beyond traditional flood-prone areas as infrastructure is overwhelmed by periods of heavy rainfall − ala Hurricanes Matthew in 2016 and Florence in 2018. Damages tied to Florence, for example, were estimated to top $22 billion in North Carolina, with much of that hitting inland areas. Jarred Chappell, chief operating officer with the rate bureau, said the increase in the number of natural disasters and the payments forked out by insurance companies in their wake is also driving up the cost of insurance that the insurance companies themselves take out to help them stay solvent during high claim events. He estimated the cost of reinsurance, the insurance for insurers, is rising at nearly 50% a year, with no one clear when the massive increases that companies have to shoulder or pass on to their customers will end. Chappell said rising costs for labor and raw materials also are making repairs more expensive, further eating into the cost for insurers. But another factor, officials say, is one that homeowners probably on one hand don’t mind seeing − the rising value of coastal property. Nearly a dozen homes in New Hanover County have sold for more than $6 million, and nearly all of those sales have occurred in the past few years, according to MLS statistics. Even more “affordable” properties have seen their values surge in the lead up and through the pandemic years. Using data from the real estate website Zillow, the online data website Stacker determined that Wrightsville Beach was the North Carolina community with the fastest-growing home prices. The site said home values in the popular New Hanover County beach town averaged nearly $1.35 million in March 2023, with prices up 8.6% over one year and 82% over five years. Among other Tar Heel communities that have seen the biggest property value increases, a big chunk were other towns clustered on or near the state’s string of barrier islands. Rebuilding or repairing more valuable property is inherently more expensive. And the rising risk for insurers comes just as more and more people are deciding to give coastal living a shot. The population of New Hanover, Brunswick and Pender counties − the Wilmington metropolitan statistical area (MSA) − is forecast to increase from 450,000 in 2020 to more than 625,000 by 2040.  Other coastal areas in the South, such as Florida and South Carolina, are seeing similar population booms.

Are coastal homeowners getting picked on?
Considering other recent rate increases, a lot of residents probably feel that way. The N.C. rate bureau last summer proposed a 50.6% increase in dwelling insurance rates, which covers second homes and rental properties. While rates statewide would rise by more than half under the plan, they would increase much more near the coast. The proposed increases for extended coverage in “Territory 140,” which covers beach and coastal areas in Southeastern North Carolina, would go up more than 97% for buildings and 70% for contents. A public hearing on the proposed increases is scheduled for April 8. The federal government also is looking to “right-size” its financial liabilities in our new climate change-influenced world by significantly raising the costs of participating in FEMA’s National Flood Insurance Program by moving to a risk-based approach in determining premiums. First Street Foundation, a nonprofit research and technology group based in Brooklyn, New York, estimates the average flood insurance premium charged to the country’s most flood-prone homes would have to more than quadruple to make the flood program, which annually bleeds red ink, solvent and ensure homeowners are paying their fair share. Under congressional and other pressures, FEMA will now raise premiums by a maximum of 18% a year until policies meet the new rate recommendation on a property’s potential risk. Many coastal and inland areas in Southeastern N.C. are in areas where flood insurance is required if you have a mortgage.

What happens now?
Since the insurance market in North Carolina is regulated, the industry has to submit its proposed rate increases to the N.C. Department of Insurance. The review process includes a public comment period. If Insurance Commissioner Mike Causey, as expected, doesn’t agree with the requested rate increases, the rates will either be denied or negotiated with industry. If a settlement cannot be reached within 50 days, the commissioner will call for a hearing. If history is any guide, the parties will likely agree on a settlement that includes a rate increase smaller than what insurers want but potentially much higher than what homeowners think they should have to shoulder. One increasing concern for state regulators is how insurance markets in other Southern coastal states are contracting and becoming more and more difficult as companies decide they would rather leave those markets, and abandon potential customers and business, than be on the hook for risky coverages where they often aren’t allowed by states to charge premiums they feel are necessary to cover their exposure risks. This is especially true in Florida and Louisiana, two other hurricane-prone states that have seen significant storm strikes and payouts by insurers in recent years.

There are four ways the public can submit their thoughts on the proposed increases.

• • A public comment forum will be held to listen to public input at the N.C. Department of Insurance’s Jim Long Hearing Room, 325 N. Salisbury St., Raleigh, on Jan. 22 from 10 a.m. to 4:30 p.m.
  • A virtual public comment forum will be held simultaneously with the in-person forum on Jan. 22 from 10 a.m. to 4:30 p.m. The link to this virtual forum will be: https://ncgov.webex.com/ncgov/j.php?MTID=mb3fe10c8f69bbedd2aaece485915db7e
  • Emailed public comments should be sent by Feb. 2 to: [email protected].
  • Written public comments must be received by Kimberly W. Pearce, Paralegal III, by Feb. 2 and addressed to 1201 Mail Service Center, Raleigh, N.C. 27699-1201.

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Insurance Commissioner Causey, specialists visit Down East
From hurricane damage to the current proposed rate increase for homeowners insurance, having a home on the North Carolina coast often comes at a price. To help property owners better understand their current insurance and what it covers, the Down East Resilience Network, a group focused on adaptation and resiliency for the Carteret County communities, held an all-day community roundtable on insurance at the Core Sound Waterfowl Museum and Heritage Center. Insurance specialists, including Insurance Commissioner Mike Causey, were invited to answer questions, and provide information. Causey told the crowd that making sure your property is more resistant to storms can help hold down insurance costs. “I think anything we can do to protect the property from wind damage, storm damage, knowing what to do before, during and after a storm is most important in saving lives and holding down our insurance costs,” Causey said, adding there are grant programs for mitigation. The about 100 who dropped by throughout Wednesday were able to speak with representatives from the state departments of Insurance and Public Safety, and the North Carolina Insurance Underwriting Association, a tax-exempt coastal property insurance pool, and other insurance specialists. “I want you to understand that everyone lives in a flood zone. The level of risk varies,” Charlotte Hicks said that morning. The flood insurance consultant said that has been her mantra, “everyone is in the flood zone.” “I want you to be able to assess your risk. Make a good decision for you. Does every single person in the United States need to buy flood insurance? Probably not, but you need to know what your true level of risk is and whether or not it’s a smart decision for you to make. And I think so many people don’t realize what their risk truly is. And if they did, they would purchase flood insurance and they would not have a problem.” When asked how a homeowner can best prepare for a natural disaster, Department of Insurance Consumer Complaints Analyst Tim Crawley told Coastal Review that the “number one thing” is to have homeowners insurance in place and understand what’s covered in the policy. He also recommended making sure to keep the structure maintained and let the “cell phone be your friend.” “Use your phone take a picture of your policy” ahead of the storm, take photos around the home as a way to inventory personal property, he said. “If your house gets decimated, all those papers are gone. You can at least retrieve that from an online cloud. From a floodplain management perspective, “know your risks,” answered Eryn Futral, a National Flood Insurance Program planner with North Carolina Emergency Management, when asked how a homeowner can best prepare. “Don’t just look at the flood maps that are available. Look at the other tools that might show you different flooding scenarios depending on storm surge for the type of flooding that you have,” Futral said. Futral advised asking neighbors and other residents how high waters have been in the past and what types of storm caused flooding. She also recommended online resources such as the North Carolina Flood Inundation Mapping and Alert Network, or FIMAN, a flood-risk information system, and the NC Floodplain Mapping Program. Department of Insurance Regional Director Jessica Gibbs added that there is a waiting period to buy flood insurance. “Some people will try to buy it right before the hurricane hits, which is never the best.” It’s also unavailable once a storm enters a prescribed geographic window. Companies will not put new policies in effect in these situations.

Companies seek big rate hike
Causey, during his remarks, encouraged residents to submit their input during the public comment period ending Feb. 2 on the North Carolina Rate Bureau’s proposed rate increase of 42.2% statewide. The requested increase includes a 99.4% hike for beach areas in Brunswick, Carteret, New Hanover, Onslow and Pender counties. The most recent rate increase request was in November 2020, when the Rate Bureau sought an overall average increase of 24.5%. That resulted in a settlement between Causey and the Rate Bureau for an overall average rate increase of 7.9%, according to Department of Insurance website. Causey explained the rate bureau system to the 50 or so at the waterfowl museum Wednesday. The association representing insurance industry interests was created by the North Carolina General Assembly in 1977, and any insurance company that writes business in the state must be a member. When insurance companies want to raise rates on car or homeowners insurance, they’re required by state law to submit a rate filing to the Department of Insurance, which can be 2,000 to 3,000 pages that actuaries must then comb through. The rate bureau this year is “asking for a whopping increase on homeowners averaging 42% statewide but is almost 100% on some of our coastal areas, from Carteret down to Brunswick County,” he said. As required, the department has scheduled a public hearing for 10 a.m. to 4:30 p.m. Monday, Jan. 22, in Raleigh’s Albemarle Building. There is a virtual hearing taking place at the same time. About 6,000 people have sent letters and emails so far with their opinion on the proposed homeowners rate increase, Causey said. At the end of the roundtable Wednesday afternoon, Causey reiterated to Coastal Review that “the rate increase is a proposal, and not a done deal. We have a long way to go, and the people need to let their voices be heard.” The public can email comments to [email protected], or by mail to Kimberly W. Pearce, Paralegal III, by Feb. 2 and addressed to 1201 Mail Service Center, Raleigh, NC 27699-1201. All public comments will be shared with the North Carolina Rate Bureau. If Department of Insurance officials do not agree with the requested rates, the rates will either be denied or negotiated with the North Carolina Rate Bureau. If a settlement cannot be reached within 50 days, the Commissioner will call for a hearing, according to a release from Causey’s office.

‘A few major factors’
North Carolina Rate Bureau Chief Operating Officer Jarrod Chappell responded to Coastal Review Wednesday in an email that the rate indications in the filing were “being driven by a few major factors reflected in the data,” including rising costs to repair homes. “We have all seen high rates of inflation in numerous aspects of our lives recently and construction supplies are not immune to that,” Chappell said. He cited rising labor costs in the construction market since the last filing and noted greater demand than supply in the construction labor market. “The largest driver overall, however, is reinsurance costs. Homeowners insurance companies must buy reinsurance to cover catastrophic claim exposures and their costs for reinsurance have risen roughly 50% per year over the last 3-4 years,” he said in the email. “This is primarily due to climate change and increased population/exposures in North Carolina. This is especially a problem in the coastal communities where they have the greatest exposure to hurricanes.” Chappell said it’s the rate bureau’s statutory responsibility to collect data from the insurance companies on any policies written in the state and use that data to determine an adequate rate that will maintain a healthy insurance market for consumers. “At this point, NCRB has supplied that data to the Commissioner of Insurance with the rate indications. The Commissioner will now review that data and ultimately determine what an appropriate rate should be. Consumers should expect to hear a response from the Commissioner within the next two months where he can either accept the changes as indicated or order a hearing to discuss it further. We have requested an August 1, 2024 effective date for the new rates, but the process often takes much longer than that,” he continued. As a homeowner, Chappell said he understands the concerns about the numbers they’re seeing in the news. He advised shopping around. “One thing people should keep in mind is that the Rate Bureau sets a base rate that insurance companies then deviate off of in order to price individual risks accordingly. What that means in the market, is that many homeowners policies are already priced with adequate rates and any change to the base rate will have little to no impact on them,” Chappell said. “We are lucky to have a very competitive insurance market in NC, because it helps keep our rates lower than many other similar states around the country. Maintaining an adequate base rate is critical to keeping that market as competitive as possible.”
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Previously reported – February 2024
Brunswick County Commissioners Send Letter to NC Insurance Commissioner on Proposed 2024 Insurance Rates

On behalf of the Brunswick County Board of Commissioners, I am writing to express the Commissioners’ opposition to the North Carolina Rate Bureau’s proposed 2024 homeowner insurance rate increases. We have serious concerns that these rates will negatively impact property owners’ ability to protect their homes and assets effectively and affordably if approved.

While all the proposed rate changes for counties are significant, Brunswick County and our region are targeted with some of the highest increases compared to many of the western and central parts of the state. All three proposed rates affecting Brunswick County would exceed the state average increase of 42.2% based on the Bureau’s requested rates. Two of these rates are also the highest among all the rates proposed. 

• • • 99.4% Proposed Increase for Beach Areas in Brunswick County
    • 71.4% Proposed Increase for Eastern Coastal Areas of Brunswick County (select zip codes)
    • 43% Proposed Increase for Western Coastal Areas of Brunswick County (select zip codes)

Concerns About Proposed Rate Increases

• • Disproportionately Impacts Seniors and Residents on a Fixed-Income. While Brunswick County is recognized as one of the fastest growing counties in the state and nation, much of that growth is due to the migration of older residents. Brunswick County currently has the highest median age in the state at 57 years and one-third (34%) of our population of 153,064 is 65 years or older. Many older and retired residents, as well as our workforce population, are on fixed incomes and are not expecting nor are able to afford such a major increase to their home insurance.

• • Detrimental to Affordable Housing and Home Ownership. Access to affordable housing is a pressing challenge for our county. Increasing insurance rates will only make it harder for individuals to afford to own a home here if insurance bills become even more expensive. It will also make it more difficult for renters who already cannot afford to own or save for a home, as the rate increases will be passed down to them through their leases.

• • Unfairly Targets Beach Community Properties. Yes, beachfront properties are susceptible to major impacts from natural disasters, but so are inland areas. Our state’s coastal communities are getting hit with the brunt of the increases despite the fact that inland counties are often just as or even more affected by damaging floods and other issues from these storms. It also appears that some inland counties that experienced damaging floods or wildfires over the past few years have not seen the same level of rate increases as what Brunswick County areas are facing.

• • More Transparency Needed in How Rates are Calculated. Based on the NC Rate Bureau’s proposal, it appears it is proposing rates to cover maximum total destruction of a property. However, not all properties’ structures are totally destroyed during weather disasters to the point they require full insurance payouts for replacement. We are curious to know what research was conducted to warrant such a drastic hike in the rates for Brunswick County properties. The Bureau must provide clearer and more transparent information on how it made these recommendations and how all types of hazards and disasters are considered statewide through the process. 

We strongly urge you to consider the short- and long-term repercussions such a drastic increase places on the property owners in Brunswick County and to advocate for more realistic and reasonable rates. We fear that many of our residents will no longer be able to afford their insurance bills and may risk their properties by opting for higher deductibles that could impede their ability to recover from damage in the future.

We appreciate your consideration of our concerns. Please reach out to me or Brunswick County’s administration with any questions on this issue.

From the Mayor’s Desk (02/02/24)

Click here to view the letter several mayors in the county sent opposing the proposed insurance rate increase. The letter details reasons for the opposition to the proposed increase. It also requests that another hearing be scheduled and the deadline for public comment be extended.

The undersigned mayors of Brunswick County strongly oppose the huge increase in property rates requested by the Insurance Bureau.

In Brunswick County, the proposed rates range from 43% to 99.4% with the rates for the majority of Brunswick County citizens ranging from 71.4% to 99.4%. When the proposed 15% increase in wind and storm insurance is added, the rates would increase from 58% to 114.4%. In their totality they are the highest rates in the State of North Carolina. We are not aware of any data that supports such a massive and punitive increase. Nothing has occurred in terms of massive losses in Brunswick County since the last increase that would justify such an increase.

The impact of this proposed increases would be particularly devastating to three at risk group of citizens in Brunswick County. First, in an area where there is a lack of affordable housing, rents would likely increase as the costs of insurance is passed on renters. Second many first time buyers and current homeowners will find these increase either foreclose the option to buy a home or afford it. As Mayors we are particularly concerned about the impact of this increase on teachers, first responders, medical personnel, government employees and service industry employees. Third, these proposed increase would impose significand hardships on the elderly who are living on fixed incomes.

In addition to opposing this increase, we urge that your staff carefully review both the proposed increases to determine the validity of the claimed justifications and their impact on the citizens of Brunswick County.

As you know, North Carolina law states that insurance rates shall not be excessive, inadequate or unfairly discriminatory. While we understand that North Carolina citizens do need access to insurance coverage, we believe that these proposed rates are excessive, discriminatory, and limit North Carolina citizens’ access to insurance.

Finally, we are concerned that there was little time to appear at the hearing or submit written comments. We respectfully request that another hearing be scheduled and the deadline for submitting written comments be extended.

N.C. Insurance Commissioner calls proposed rates ‘excessive and unfairly discriminatory’
N.C. Insurance Commissioner Mike Causey has denied a request by the North Carolina Rate Bureau to raise homeowner insurance rates by an average of 42.4 percent. The North Carolina Rate Bureau, an organization that represents insurance companies in the state, has proposed a rate increase of as high as 99.4 percent for some beach areas. “I haven’t seen the evidence to justify such a drastic rate increase on North Carolina consumers,” Causey said Tuesday. “The Department of Insurance has received more than 24,000 emailed comments on this proposal, with hundreds more policyholders commenting by mail. Scores more consumers spoke during a public comment forum. North Carolina consumers deserve a more thorough review of this proposal. I intend to make sure they get that review.” Causey, who called the proposed increases “excessive and unfairly discriminatory,” has set a hearing date for Oct. 7 at 10 a.m. State law gives the insurance commissioner 45 days to issue an order after the hearing. “Homeowners were shocked with the high amount requested by the insurance companies, and so was I,” Causey said. Last month, Causey told WECT that the office has received over 6,000 messages from groups and people in southeastern North Carolina.
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NC insurance commissioner rejects home insurance increase, court hearing set
Tuesday morning the state insurance commissioner rejected a significant rate increase as petitioned by the North Carolina Rate Bureau to the state Department of Insurance. The increase was projected to inflate by roughly 42% across North Carolina but would be significantly higher for homeowners in the coastal region — by 99%. The North Carolina Rate Bureau asked for the rates to become effective Aug. 1, 2024. The bureau represents the insurance industry to make policy suggestions to the Department of Insurance, which then negotiates with the state government. According to Causey’s office, the state has heard from around 25,000 North Carolina homeowners opposed to the hike. This doesn’t include people who spoke out at the public hearing held Jan. 22. Many listed rising costs on groceries, gas and other utilities already affecting monthly budgets. “I heard loud and clear what the public said,” Causey said Tuesday, calling the potential insurance escalation unfair and discriminatory. Locally, area government officials, including in Brunswick and New Hanover counties, signed letters sent to Causey in opposition. Brunswick County commissioners specifically said its region faced some of highest proposed increases, at 99.4% for Brunswick beach areas and 71.4% more for eastern coastal areas of the county. One concern from commissioners is the disproportionate effect it will have on seniors on a fixed income. Brunswick County has the highest median age in the state at 57 years and 34% of the roughly 150,000 population is 65 years or older. Brunswick commissioners also stated insurance increases would impact affordable housing and home ownership. Storm risk is the leading cost on insurance spikes in coastal areas, according to the rate bureau. The NCRB uses storm and climate modeling from Moody’s and Verisk credit services to inform calculations on catastrophic storm risk. COO Jared Chappell said last month those risks are trending upward. “I think it is partly due to climate change and partly also due to greater exposure at the coast,” Chappell said. “We’ve seen more and more — especially after Covid — more and more people move into the coastal areas.” Causey has issued a court hearing on the issue to take place Oct. 7 unless parties reach a settlement beforehand. The latter is normally followed so as to not pass on the costs of court to the consumer. The last time a rate increase went into effect in North Carolina was 2020. It was presented to go up by 24.5%, according to previous PCD reporting, but was negotiated down to 7.9%.
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NC has rejected the proposal to raise coastal insurance rates by 99%. Now what happens?
State Insurance Commissioner Mike Causey called the proposed increase “excessive and unfairly discriminatory.” Insurance industry says climate change, inflation driving the need to raise premiums
In a move that surprised no one, N.C. Insurance Commissioner Mike Causey this month rejected a proposal by the state’s insurance industry to raise homeowner insurance premiums by 42% statewide and an eyewatering 99% in beach and coastal areas around Wilmington. “Homeowners were shocked with the high amount requested by the insurance companies, and so was I,” Causey said in a release. The rejection, however, doesn’t mean the end of the process, but just the beginning of likely negotiations between regulators and the industry that could be influenced by the upcoming November election, in which Causey is seeking re-election.

How did we get here?
The N.C. Rate Bureau, which represents the state’s insurance companies, cited two main factors for the surprisingly large rate increase proposal. First, is the rising cost of pretty much everything, including labor and potential repairs, driven by inflation and the lingering impacts of labor and material shortages tied to the COVID-19 pandemic. The other is climate change, which is causing more frequent and widespread property destruction, particularly tied to bigger and stronger hurricanes, as the warming climate fuels more severe weather events. Damages in North Carolina tied to 2018’s Hurricane Florence, for example, were estimated to top $22 billion, with much of that hitting inland areas. Two other factors also could be playing a role in the industry’s request, said Don Hornstein, an administrative and insurance law expert with the University of North Carolina School of Law. The first is the moratorium that was put into place during the pandemic on any rate increases. That left the industry going several years without seeing an increase in homeowner insurance rates even as the price of everything else increased. The last increase came in 2020, when insurance companies originally wanted to hike premiums by 24.5% but eventually agreed to settle for 7.9% after Causey rejected their initial request. But Hornstein said an equally big factor weighing on the size of the proposed rate increase is the cost of reinsurance − basically insurance for the insurance companies themselves in case a large-scale disaster stretches their financial ability to respond. “These increased weather risks are international, not just in the U.S.,” he said, noting the recent massive wildfires in Europe and Australia as just two examples. “And as the risk is increasing everywhere, it works to the detriment of insurers seeking reinsurance everywhere.”

Rate increase shock
The rate bureau’s recent proposal included an increase of 99.4% for beachfront properties in New Hanover, Brunswick and Pender counties in the Wilmington area and Carteret County, which includes Emerald Isle. Farther up the coast, beach areas along the Outer Banks would have seen a 45% increase. Areas on the mainland but near the Intracoastal Waterway in the Wilmington area would have seen proposed increases of 71.4% for those roughly from U.S. 17 oceanward and 43% for those farther inland. The increases would be determined by a property’s ZIP code. Proposed increases in the rest of the state also would be substantial, but not as much as a gut punch for coastal homeowners in Southeastern North Carolina. The reaction from the public and local officials was not surprising. “The Department of Insurance has received more than 24,000 emailed comments on this proposal, with hundreds more policyholders commenting by mail,” Causey said. “Scores more consumers spoke during a public comment forum. North Carolina consumers deserve a more thorough review of this proposal. “I intend to make sure they get that review.” 

What happens now?
As part of the process of raising rates in North Carolina’s regulated homeowner and auto insurance markets, the insurance commissioner has the right to reject the rate bureau’s proposal and schedule a hearing. Causey has done that, scheduling a hearing for Oct. 7. State law gives the insurance commissioner 45 days to issue an order once a hearing concludes, and the insurance industry always has the option of taking the issue to the courts if they reject the commissioner’s findings. But this is an election year, and Causey, a Republican, is seeking re-election. Assuming he wins the upcoming GOP primary against two other candidates, that could make his appearances during the hearing − where he would likely attack the proposed rate increase as “excessive and unfairly discriminatory” as he already has − a strong bully pulpit for him during the height of campaign season. Many times, though, state regulators and industry negotiate a settlement behind closed doors before a hearing. Hornstein said it’s likely the parties will talk, if they aren’t already doing so, and exchange numbers and thoughts on what kind of increase would be needed to keep the state’s insurance market competitive, profitable for companies, and attractive to new entrants. He said state regulators will have to walk a fine line in balancing the desires of property owners with the needs of industry. Otherwise, Hornstein warned, North Carolina’s insurance market could end up looking like Florida, Louisiana or even more recently California, where numerous insurance companies have decided their exposures to disasters − whether hurricanes, flooding or wildfire − just isn’t worth the risk and the high premiums, costing them business, they’d need to charge consumers. “If insurers don’t feel they have enough rates, they will cancel policies or pull out,” Hornstein said, noting that Nationwide declined to renew more than 10,500 policies in the state last year, mostly due to hurricane concerns. “Either they get what they think they need, or they’ll vote with their feet.”
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Previously reported – April 2024
Anti-regulation sentiment may be fueling insurance crisis
When Insurance Commissioner Mike Causey met last month in Manteo for a brief overview and Q&A with community members worried about property insurance issues, he stressed that his office had limited power over building code changes and insurance company business decisions in North Carolina that have unnerved homeowners. First of all, he said, billion-dollar losses from storms, wildfires, floods and other disasters are worldwide challenges. But the property insurance industry in the U.S., where population numbers and real estate values are often highest in the highest-risk areas, is approaching its own survival crisis. “It’s a very hard market right now across the United States,” Causey said. “Companies just don’t want to write homeowners policies.”
Confronted with looming policy price hikes and feeling powerless to stop their insurance companies from pulling out of the state, frustrated homeowners are turning to the government for solutions. “People say, ‘Why don’t you change the system?’” Causey said, responding to the audience’s questions about future insurance affordability and access. “The only group that can change that system is the legislature.” Whether Causey, a Republican who is seeking reelection to the post he’s held since 2017, is shifting blame may be debatable, but it is evident from the last legislative session that focus on property insurance viability in the state was not a priority for the North Carolina General Assembly. Rather than modernizing the state’s 15-year-old residential building codes, a step incentivized by lower property insurance costs, millions in government grants, and more resilient and efficient construction, North Carolina legislators passed a law, House Bill 488, that in much of the state banned inspection of exterior sheathing in structures exposed to winds of 140 mph or less. The bill also removed authority from the North Carolina Building Code Council, a panel of industry specialists that had been working for months on updating codes, froze the old energy-efficiency standards until 2031 and directed creation in 2025 of a new separate residential council. While the legislation is certain to deprive the state of available funds for climate resilience, it is also locking homebuyers into new housing that is built to outdated standards and thus more vulnerable to climate hazards. As a result, homebuyers will have increasingly higher utility bills, as well as structures more prone to damage in weather events, ultimately making their home more expensive to own. “Everybody’s going to be paying quite a bit more for homeowners’ insurance because … our building codes are hopelessly out of date when it comes to residential construction in some areas,” said Kim Wooten, a member of the Building Code Council and the chair of the council’s ad hoc energy committee. “The other piece of this is that North Carolina is now going to lose hundreds of millions of dollars in grant money from the federal government to increase our ability to withstand flooding from flood events, storm events, weather disaster events.” The bill also allocated about $500,000 for staff members for the new residential council, which had been part of the existing Building Code Council, she said. Wooten, who was on the panel from 2008 to 2013 before rejoining about five years ago, is an engineer. Anti-regulation sentiment in the legislature as well as persistent climate change skepticism, Wooten said, has contributed to lawmakers’ resistance to updating codes. The North Carolina Home Builders Association, which lobbied for the bill, had said that sheath inspection is unneeded and, along with energy-efficiency updates, would add an average of about $20,000 in costs to a new home. But in an independent analysis Wooten conducted as part of her role with the energy committee while reaching out to green homebuilders, industry insiders and researchers, said that energy efficiency was consistently one of the five top things homebuyers want in a home — and the costs were “nowhere near” what the homebuilders claim. “They just pulled a number out of a hat, which is the same number they pulled out of their hat five years ago, 10 years ago, 15 years ago,” Wooten said. “Yeah, it’s always $20,000.” Zach Amittay, a Southeast advocate for E2, also known as Environmental Entrepreneurs, told Coastal Review that it’s understandable that the homebuilders’ group would want to protect their bottom line, but ultimately, the consumer and the taxpayer will be paying the piper. “It’s going to become more and more financially untenable for folks to be able to have insurance, and then you’re dealing with more uninsured homes and then what happens after storm damage,” he said. Less resilient construction often translates to more severe damage to both the interior and exterior, Amittay added. That leaves underinsured property owners unable to afford repairs or replacement of their home. “That’s also the kind of thing that, in my opinion, the government should be taking steps to try and protect residents from these sort of outcomes,” Amittay said. On its website, the North Carolina Home Builders Association said that “viable” code changes would have to be supported by data and follow proper processes. “We work to develop and support cost-effective and affordable building codes, standards, regulations and state legislation in the construction area,” according to the website. “While safety is our priority, proposals also have to be examined for their cost-benefit and practicality.” Typically, cities and towns in the U.S. base their building codes on recommendations that are updated every three years from the International Code Council, a Washington, D.C.-based nonprofit. According to a Feb. 28 Swiss Re Institute report, at $97 billion, or 0.38% of gross domestic product, the U.S. suffers the highest economic cost “in absolute terms” from weather events in the world, mostly related to hurricanes. The Swiss Re Group is a leading global provider of reinsurance and insurance. “The first step towards cutting losses is to reduce the loss potential through adaptation measures,” the report found. “Examples of adaptation actions include enforcing building codes, increasing flood protection, while keeping an eye on settlement in areas prone to natural perils.” Each dollar invested in new building codes designed for construction that can better withstand storms can save $6 to $10 later, according to the report. “Ultimately,” the report said, “losses as a share of GDP of each country will depend on future adaptation, loss reduction and prevention.” Property owners on the Outer Banks and elsewhere on the North Carolina coast were shaken earlier this year by eye-popping proposed rate increases for homeowners insurance, averaging 42% statewide and as high as 99.4% in some coastal counties. Rates in the state are set by the North Carolina Rate Bureau, which was established as a separate entity to represent insurance companies in the state, and operates independently of the insurance commissioner. “It’s the largest rate request I’ve ever seen, (since 2017 when he took office) 42% state average, 99.4% in some counties. 25,000 letters and comments, including from associations and county boards, congressional delegations,” said Causey, who has challenged the Rate Bureau. But barring a negotiated agreement, Causey said he expects the rates will be adjudicated in court on Oct. 7. “I haven’t seen the evidence to justify such a drastic rate increase on North Carolina consumers,” Causey said in a Feb. 6 press release. Other insurance impacts weren’t as broad, but they can factor into future costs. In February 2023, Nationwide insurance had notified the state that it would not be renewing 10,525 policies in North Carolina, about half of which were related to hurricane risk, spurring homeowners’ fears of more companies fleeing. Then, in August, the legislature overturned Gov. Roy Cooper’s veto of H.B. 488, allowing the building code bans to go into effect. Causey’s office had opposed the bill, and he said that his office “weighs in” on insurance company actions in the state such as Nationwide’s decision. At the same time, a volatile property insurance market can spook real estate investors, and eventually, economic stability. “It’s not going to be, ‘Can you afford it?’” Tanner Coltrain, agency manager at Farm Bureau Insurance in Swan Quarter, told Causey at the Manteo meeting, referring to insurance availability. “It’ll be, ‘Can you even buy it?’” There may be some comfort in that North Carolina has what many consider one of the most innovative programs in the nation that encompasses resilience, insurance and consumer incentives and costs in one fell swoop. The North Carolina Insurance Underwriting Association, or NCIUA, offers grants up to $8,000 for eligible homeowners toward roof replacement with what’s known as a fortified roof through its Strengthen Your Roof pilot program. Studies have shown that as much as 90% of catastrophic insurance claims from storm damage are related to roof failures, and the NCIUA program has shown the effectiveness of fortifying roof construction. But despite its proven track record, funds for the program were decreased during the General Assembly’s last session. “We’re looking for the legislature to put more money into resilience,” Causey said.
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Previously reported – October 2024
As a hearing looms, here’s where talks over a massive 99% coastal insurance rate hike stand
Insurers want to raise homeowners insurance premiums by 42% statewide and an eyewatering 99% in beach and coastal areas around Wilmington. State regulators have said no, triggering an Oct. 7 hearing
Negotiations between state regulators and insurance companies over a potentially massive rate increases for North Carolina homeowners are going down to the wire. In January the N.C. Rate Bureau, a 14-member board that represents the industry, submitted a proposal to raise homeowner insurance premiums by 42% statewide and an eyewatering 99% in beach and coastal areas around Wilmington. The proposal, after a public hearing, was swiftly and vocally rejected by N.C. Insurance Commissioner Mike Causey. “I heard from more people on this rate filing than any other while I’ve been commissioner,” Causey, who has been in office since 2017, said on Thursday, adding his agency received more than 25,000 comments − almost all of which were against it. “And I agreed with them.” The commissioner’s action triggered a judicial hearing, which is scheduled for Oct. 7.

As that hearing grows closer, here’s where things stand.

Why do the insurance companies want such a big rate increase?
In short, because they aren’t making money and are worried about the future. The N.C. Rate Bureau cited two main factors for the surprisingly large rate increase proposal. First, is the rising cost of pretty much everything, including labor and potential repairs, driven by inflation and the lingering impacts of labor and material shortages tied to the COVID-19 pandemic. The other is climate change, which is causing more frequent and widespread property destruction, particularly tied to bigger and stronger hurricanes, as the warming climate fuels more severe weather events. Damages in North Carolina tied to 2018’s Hurricane Florence, for example, were estimated to top $22 billion, with much of that hitting inland areas. Other factors that are playing a role in the proposed substantial increase include the moratorium that was put into place during the pandemic on any rate increases and the cost of reinsurance − basically insurance for the insurance companies themselves in case a large-scale disaster stretches their financial ability to respond. “It will be four years in November since we last requested a homeowners rate increase, and even the approved change was only a small percentage of what was requested,” said Jarred Chappell, chief operating officers with the rate bureau, in an email. “That has been the case over multiple rate filings, which has contributed to the ongoing rate need.”

Why can’t the insurance companies just raise rates?
North Carolina operates a regulated insurance market. That means that companies have to receive approval from state regulators to raise most rates, including those for homeowner and auto insurance. While some in the industry have said that limits competition in a somewhat closed market and doesn’t make North Carolina an attractive market for insurance companies, Causey disagrees. He said the current system, which attempts to balance the needs of consumers and industry, offers some security for both sides and somewhat ring fences North Carolina from seeing the problems other coastal states, like Florida and Louisiana, are experiencing. In those states, many insurance companies are pulling out in the wake of repeated natural disasters and an inability to charge rates they believe reflect their liability and ability to turn a profit. That, in turn, is forcing the state to create government-run insurance companies of last resort for folks who otherwise can’t get coverage, which generally offer higher premiums and less coverage to balance their books.

Do proposed rate increases always end up in a hearing?
Generally, no, because that costs both the state and industry time and money that they’d rather not spend. Causey, a Republican who is running for re-election this November against Democrat Natasha Marcus, said in most rate disputes his department and the rate bureau have been able to negotiate before a hearing date and reach a mutually acceptable agreement. “We have done that very successfully in the past and get settlements that are mostly favorable to consumers,” he said. That hasn’t happened in this case. “We are at an impasse,” Causey said. “We’re going to court.” 

What happens at the Oct. 7 hearing?
State law gives the insurance commissioner 45 days to issue an order once a hearing concludes, and the insurance industry always has the option of taking the issue to the courts if they reject the commissioner’s findings. Causey said he understands that the industry needs a rate increase, not having seen one since the start of the decade. “And like consumers and every industry, they’re getting hit by inflation,” he said. “It’s no different than any other industry or business.” But Causey said an average statewide increase of more than 40%, and double that at the coast, just isn’t fair to North Carolina consumers. “North Carolina consumers deserve a more thorough review of this proposal,” Causey said in a statement in February announcing his rejection of the proposed rate hike. “I intend to make sure they get that review.” But whatever happens with this rate hike, that’s not likely to be the end of the financial pain for coastal homeowners. Causey said this request is mostly tied to the industry’s costs and payouts associated with the spate of natural disasters, including 2018’s Hurricane Florence, North Carolina saw several years ago. He added that his office is still dealing with claims tied to Florence, having recently paid one out to the University of North Carolina Wilmington (UNCW) tied to that devastating storm. “It takes years from the time a storm hits for the rates to catch up,” Causey said. That means damage from this month’s unnamed storm, which dropped historic amounts of rain on parts of the Cape Fear region, and losses associated with Tropical Storm Debby and any from Hurricane Helene aren’t taken into account with this rate filing. “If we could get Mother Nature to cooperate, we wouldn’t have many of these problems,” he said of the natural disasters, many tied to climate change, which have hit the state in recent years. “But that’s just not the case.”
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After Floods, Soaring Insurance Rates Become a Hot Election Issue
Few states elect their insurance commissioners. But in North Carolina, a proposed 42 percent rate hike and Hurricane Helene have raised the stakes in the upcoming election.
When Marjorie Burnside moved to the North Carolina coast several years ago after retiring as a New York City police officer, she did not know much about the candidates running for the obscure statewide offices that oversee agriculture, labor, and insurance. So, Ms. Burnside, a lifelong Republican, voted along party lines. She now considers many of her area’s elected Republicans responsible for rubber-stamping too many development projects. And she is furious that they have failed to tame home insurance premiums, which have soared by 75 percent. That was why she accepted an invitation to a friend’s recent beach house party for State Senator Natasha Marcus, a Democrat who is challenging the state’s Republican insurance commissioner. “She just gave me lots to think about,” Ms. Burnside, 59, said after listening to Ms. Marcus’s warnings about loopholes that hurt policyholders and rates in coastal areas that are likely to see a significant rise. “More people, more claims, more raises — it’s all connected.” Eleven states elect their insurance commissioners, an obscure but powerful job that affects virtually every resident through regulations and the ability to challenge or reject rate hikes on home, car and other policies. The contest has typically been treated as a down-ballot afterthought involving little-known candidates, with hundreds of thousands of voters leaving their ballots blank. But as housing and insurance costs have skyrocketed, particularly in areas experiencing whiplash from climate change and extreme weather, these races are becoming proxies for public frustration over pocketbook anxieties. “Voters are starting to experience climate change as an economic threat, and are realizing that insurance commissioners are now climate policymakers,” said Jordan Haedtler, a climate finance strategist for Climate Cabinet, which supports candidates in competitive races nationally. Insurance angst has already factored into local elections this year: In Honolulu, State Representative Scott Saiki, Hawaii’s House Speaker since 2017, lost his Democratic primary amid criticism that he had failed to rein in condo insurance rates. In Orlando, a Democrat won a special election for a state House seat by highlighting property insurance, flipping a district that Gov. Ron DeSantis of Florida easily won in 2022. Now comes the biggest statewide test, where recent polls in North Carolina — the most competitive of the four states voting for insurance commissioner in November — predict a tossup between Ms. Marcus and the two-term incumbent, Mike Causey. The timing also could not be more relevant, given the devastation wrought by Hurricane Helene in western North Carolina and Tropical Storm Debby. Claims totaling billions of dollars are likely to be filed. “In general, it feels as though the incumbent has a bit of a challenge or a hurdle to get over in that rates have steadily gone up, and right, wrong or indifferent, a consumer can point to an incumbent and say you’re not doing enough to fix that,” said Landon T. Bentham, director of sales and marketing for Callahan & Rice, a longtime independent insurance agency in Fayetteville, N.C. North Carolina has long been regarded as one of the more stable states for insurance, for both policyholders and carriers. Auto insurance rates are among the nation’s lowest. The state’s nonprofit insurer of last resort — a tax-exempt association of insurance companies that are required by law to insure properties and spread the risk — had enough cash to pay $1.5 billion in wind and hail claims after Hurricane Florence ravaged the state in 2018. But in 2023, Nationwide decided not to renew 10,000 homeowners’ insurance policies in eastern North Carolina, citing climate and other reasons. Overall, the average home insurance premium in the United States climbed by 33 percent from 2020 to 2023, far exceeding inflation, according to a new study, and some insurers are no longer writing policies in Florida, California and Louisiana. So far, at least, “no big insurer has left the state,” said Donald T. Hornstein, a law professor at the University of North Carolina School of Law, who has lectured on coastal insurance concerns. But while insurers have seen profits in 10 out of the last 11 years in North Carolina, they lost money in 18 other states in 2023, up from eight in 2013, according to an analysis by The New York Times. Against that backdrop, the North Carolina Rate Bureau, a nonprofit consortium of insurers empowered by the State Legislature to calculate adjustments in premiums, requested a 42 percent increase in January — including 99 percent in some coastal areas — citing inflation and increased costs for materials and labor. Since then, 40,000 emails, phone calls and letters have inundated the Department of Insurance, which, as the state’s regulator, must approve any increases. Mr. Causey, a former health insurance executive, has preferred to negotiate the policies affecting the state’s housing stock. In May, he negotiated an 8 percent increase in the rate that applies primarily to rental properties, down from an original request of more than 50 percent. In 2020, the last time homeowners’ insurance rates were increased, a 24.5 percent request was whittled down to 7.9 percent. But Mr. Causey rejected this year’s proposal to increase homeowners’ insurance rates by 42 percent, setting the stage for his first public judicial hearing on rate hikes on Oct. 7. “I very much understand where the people are coming from because we’re all paying higher insurance rates, and inflation is the driving factor that’s hurting all Americans,” Mr. Causey, 74, said in an interview a few weeks before the hearing. But Ms. Marcus has been on the attack, accusing Mr. Causey of approving too many rate increases without holding public hearings. She talks about a little-understood Consent to Rate law — which was amended by the Legislature in 2018, with Mr. Causey’s input — being used increasingly by insurers in North Carolina to charge homeowners more than the rates approved by the state. While Mr. Causey has often worked closely with his fellow Republicans who have long dominated the Legislature, he sided with Gov. Roy Cooper, a Democrat, on energy efficiency and resiliency in homes, and opposed a bill backed by Republicans to prohibit any updates to building codes until 2031. In the wake of Helene, Mr. Causey has renewed his calls for a statewide expansion of the last-resort insurer for vulnerable coastal properties. Ms. Marcus says that the state needs to invest more in hardening homes, and that flood maps are woefully outdated. Much of Helene’s damage was caused by flooding, and few people in western North Carolina had taken out federal flood insurance, which is not within the purview of the state insurance commissioner. Still, the storm was clearly on the candidates’ minds on Monday, when Mr. Causey and Ms. Marcus held separate news conferences before the rate increase hearing. The proposed rate hikes, which were requested at the beginning of the year, were much lower in western North Carolina than along the coast. So, when asked whether Helene would be a factor in future insurance-rate increases, Mr. Causey said, “It very well could be.” But he also cautioned that it was too early to know. “We’re just now seeing impacts from Hurricane Florence, and that was back in 2018, so we have to wait and see how it shakes out,” he said. Part of an insurance commissioner’s job is to visit storm-hit areas and set up victim assistance centers to help residents with insurance claims and other needs. A few weeks before Helene, Mr. Causey visited North Carolina’s southeastern coast — on the opposite end of the state from where Helene hit — after a storm unexpectedly dumped as much as 18 inches of rain there. In the fast-growing but risk-prone counties of Brunswick, New Hanover and Pender on the southeastern coast, homeowners now pay an average of roughly $3,100 a year on insurance, or up to 67 percent more than other counties in risk-prone areas. Paul Cafasso, a retired I.T. executive from the Danbury, Conn., area, is part of a wave of retirees from the Northeast who have moved to a sprawling development in Brunswick County, where the number of people aged 65 or over more than doubled between 2010 and 2020. A political independent, Mr. Cafasso, 81, said his community’s condo association had seen its insurance costs double in the last two years, forcing the association to switch to another carrier. So, he intended to research each candidate’s plans. “On a bell curve, we’re on the upward part of the bell curve — who knows where it’s going to end?” he said. During a tour of his farm, Jimmy Tate, a former Pender County commissioner and community college president, said more people, crushed by escalating premiums, are agonizing over whether even to take out insurance. A former Democrat who is now a Republican, Mr. Tate, 46, wants the two candidates to hold corporate interests accountable, and to visit rural and underserved communities. “If they really want to care, they can come on my farm and I can hold a meeting in my event barn center,” he said. “I can guarantee them I can pack the room with farmers, all over this region, who want to hear what they have to say about their rate increases.” Known for uncorking fiery speeches on the Senate floor, Ms. Marcus, 55, was gerrymandered out of her district by Republicans, who hold the supermajority. She opted to run for commissioner rather than move to another area to run again. In an interview, she said her experience as a lawyer would enable her to adopt a more adversarial posture when dealing with the insurance establishment. “I’m a former litigation attorney — very comfortable in a court-like setting, eager to do that kind of cross-examination,” she said. Refusing to take campaign contributions from the insurance industry, in contrast to Mr. Causey, Ms. Marcus has raised more than $427,000, nearly double her opponent’s haul. Mr. Causey has been a visible presence all over the storm-ravaged state, warning about the future. At a meeting with insurance agents in the Outer Banks, where homes have been collapsing into the ocean as a result of rising sea levels, Mr. Causey voiced his frustration with the state’s building codes. “In 2017, we were the fifth best in the nation in building codes,” he said. “We’ve dropped to number eight. We’re going the wrong way.”
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