North Carolina Faces Rising Homeowners’ Insurance Rates
Background on the Rate Increase Proposal
North Carolina homeowners are bracing for a significant decision regarding a substantial proposed increase in homeowners’ insurance premiums. The North Carolina Rate Bureau (NCRB), representing private insurance companies, has requested an average statewide rate hike of 42.2%. Insurers argue that escalating costs due to natural disasters, repair expenses, and reinsurance premiums necessitate the increase.
While the proposed hike averages 42.2%, coastal areas like Emerald Isle and Swansboro could see skyrocketing increases ranging from 71.4% to 99%. Meanwhile, homeowners in mountainous regions would face comparatively smaller increases of 4%-20%, although recent flooding from weather events like Tropical Storm Helene could potentially alter these figures.
The hearing process began in October 2024, conducted under the oversight of Insurance Commissioner Mike Causey. Per state law, Causey has 45 days after the conclusion of the hearings to render a decision. This delay has left many homeowners anxious, particularly as insurance-related expenses have already crept up for some through mechanisms like Consent to Rate agreements.
Public Reaction and Concerns
There has been widespread public concern about these potential increases, expressed through various channels, including public comment forums, emails, and letters. Unsurprisingly, most North Carolinians oppose the rate hike, particularly those living in high-risk coastal areas, where rates are set to balloon.
For residents already burdened by rising costs of living and frequent climate-related disasters, such increases seem untenable. A member of the public who attended the January 2024 forum remarked that these rate hikes could make homeownership unaffordable in some areas, particularly along the coast. Furthermore, legislators and community advocates have raised questions about insurer accountability and whether these steep hikes are genuinely justified.
The shortfalls of Consent to Rate agreements—the state-sanctioned policy that allows insurers to charge premiums as high as 2.5 times the NCRB cap with homeowner consent—have also drawn criticism. Many homeowners feel blindsided by these notices, believing they have little choice but to accept such terms to retain coverage.
Legal Proceedings and Challenges
Reaching a resolution on the NCRB’s proposed rate hike has proven contentious. The dispute entered the courts after Causey and the insurance industry failed to come to a negotiated settlement. Previous disputes saw compromises, such as the reduction of a 2020 proposed 24.5% increase to an 8% settlement. However, no agreement was reached this time, underscoring the stakes and complexities at play.
Both sides bring strong arguments. The insurance industry cites increasing costs from catastrophic events and the rising price of reinsurance as justification for the hike. On the other hand, Causey has fought to protect consumer interests, rejecting past proposals he deemed excessive.
The inability to settle raises concerns about whether North Carolina is heading for a precarious situation similar to states like Florida and Louisiana. These states have struggled with insurers exiting the market due to unmanageable natural disaster risks. Such issues have led government-run programs to take on “insurer of last resort” roles, putting taxpayers at risk during major disasters.
Future Implications for Homeowners
While the final decision on the NCRB’s rate hike proposal is pending, its implications are clear. If approved, homeowners across the state will face increased financial strain, especially in historically storm-prone coastal areas. These changes are expected to take effect by mid-2025. For some, this may lead to hard decisions about relocating, selling property, or accepting lower insurance coverage levels.
Beyond North Carolina, this dispute highlights a broader issue in the insurance industry as climate change drives the frequency and severity of disasters. Hurricanes, flooding, wildfires, and other catastrophic events are becoming more common, prompting rising claims and operational costs for insurance companies worldwide.
Reinsurance costs have doubled in many cases, and companies like Munich Re have explicitly linked these hikes to climate change. FEMA data further underscores these risks, with places like New Hanover County at the highest risk in North Carolina due to frequent hurricanes and tropical storms.
Understanding the Larger Trends
The North Carolina homeowners’ insurance rate dispute illustrates the tension between protecting consumers and ensuring the viability of the insurance market. It raises larger questions about the sustainability of current insurance models in an era of rapid climate change. Regions prone to natural disasters have limited options, leaving local governments, insurers, and residents struggling to share the financial burden.
For homeowners, now is the time to thoroughly review their existing policies, explore mitigation options like flood-proofing, and advocate for local and state measures that better address the impact of climate-focused risks. Long-term, strengthening infrastructure, reforming insurance frameworks, and investing in preventive measures could reduce future costs and losses for all parties.