auto insurers in neutral on rate increases

Auto insurers may increase premiums on North
Carolina drivers by up to 9.4
percent starting Thursday, but a court ruling will determine whether they can
keep the extra money.

The North Carolina Rate Bureau,
which represents 144 auto insurers that operate in the state, had asked for its
largest rate increase in 14 years - 12.9 percent. But Insurance Commissioner Jim
Long turned the tables, instead ordering a 16 percent cut.

Long ruled that the insurers submitted data to back their position that didn't
justify the increase they sought. The Insurance Department also argued that the
companies skewed their depiction of North
Carolina's market by including
claims from riskier drivers who are inexperienced or who rack up insurance
points against their license and other decisions. Those drivers are assigned to
the North Carolina Reinsurance
Facility.

Insurers revamped their requested rate increase in their appeal to the state
Court of Appeals last month and are now seeking 9.4 percent, Rate Bureau general
manager Ray Evans said.

Under state law, insurers can charge the higher rate beginning Jan. 1, but any
amount collected above the 16 percent cut ordered by Long must be placed into
escrow accounts. If insurers win their appeal, they can keep the money. If they
lose, they would have to refund the money to policyholders, plus pay interest at
the prime rate plus 3 percent.

"The commissioner ordered what he felt was appropriate. We'll let the appeals
process run its due course," said Bob Mack, deputy state insurance commissioner
for property and casualty.

A court hearing on the appeal has not been scheduled.

Evans said the insurers trimmed their rate request considering the
commissioner's projections on the rate of inflation and some other factors, such
as the frequency and severity of accidents. Long's projections were close to the
insurers' estimates but somewhat lower, and the courts generally defer to the
commissioner on such matters, Evans said.

The Rate Bureau argued in its original request for increased premiums that
rising costs for medical care and car repairs justified higher rates, along with
the slowing decline in accident rates.

Insurance rate increases regulated by the state commissioner are the maximum
rates auto insurers can charge. Competition drives insurers to charge many
drivers less than the top rate. 

Long decided not to seek re-election this year after 24 years in office. He is
being replaced next month by fellow Democrat Wayne Goodwin.