‘We have no voice’: NC consumers sidelined as state and insurers negotiate new rates

For the last 17 years, Janet Rupert has lived with her husband in a rustic, 1991 cedar-sided home tucked in the woods on Chapel Hill’s outskirts.

Newly retired and living on a fixed income, they budget for recurring expenses, like homeowners’ insurance, setting aside funds each month into a savings account.

But it’s getting harder to do, says the 71-year-old.

In seven years, their premiums with Pennsylvania-based Erie Insurance jumped by almost 60% — from $1,722 in 2018 to $2,756 in 2024. Even though they’ve never filed a claim in nearly two decades.

“It feels like price gouging. I don’t get it,” said Rupert, who increased her deductible to stay at a lower, more affordable rate. “We’re both on Social Security. I have a pension. But that doesn’t make this right.”

The Ruperts reflect a growing reality for homeowners across North Carolina. As climate-driven losses mount and inflation remains high — up 20.8% since February 2020, according to Bankrate — the insurance industry is teetering. Consumers are feeling the knock-on effect.

Stronger hurricanes, frequent wildfires and billion-dollar-loss events from convective storms — like the recent “ catastrophic flash flood ” in South Florida — are driving up costs. Insurers saw their net losses jump to $101.29 billion in 2023, up 21.3% year-over-year, a May report from S&P Global found, “the worst underwriting results in over a decade.” Only two of the 20 largest homeowners’ insurance companies — Chubb Ltd. and Amica Mutual Insurance Co. — were profitable last year, the report said.

The slump has led to a surge in denied claims and nonrenewals, consumer groups said. Last October, Ohio-based Nationwide decided not to renew 10,525 homeowners’ insurance policies in Eastern North Carolina. While the fallout appears contained for now, underwriters are imposing stricter guidelines across the state. Increasingly, they’re using drones and other “insurtech”— like artificial intelligence and risk modeling — to screen customers , reports show.

Carriers are also boosting rates in a bid to return to profitability. Just last year, rates jumped 11.3% nationwide, a separate S&P Global report said. In total, 25 states saw an effective rate change — a key indicator of how an insurer’s loss ratios are likely to change — of at least 10% in 2023, compared to only six states during the prior year.

By all accounts, North Carolina is faring better than most. The state saw an effective rate change of 9% in 2023. That’s below the nation’s average (11.3%) and 25 other states, including Texas (23.3%), Arizona (21.8%) and Utah (20.3%), S&P Global found.

Prices are also contained. The average cost is $1,975 per year, or about $165 per month, according to a NerdWallet analysis . That’s close to the national average of $1,915 per year, even with the state’s consent-to-rate threshold, written into law , allowing companies to charge rates up to two and a half times the state-approved rate.

But “better than most” is not much consolation. Relief, meanwhile, doesn’t appear on the horizon anytime soon, experts say.

After a filings moratorium lifted in January, the N.C. Rate Bureau, which represents companies that write insurance policies in the state, asked for a 42.2% average increase across the state. It’s calling for even steeper increases for storm-prone areas along the coast.

Across the nation, insurers are strategically lobbying for expedited rate-increase approvals, said Amy Bach, executive director of United Policyholders, in an email. Each state has its own process. Generally speaking, she said, regulators seem “hard pressed” to bring the necessary staffing or actuarial resources to refute their claims or reject their requests “in part or whole.”

In the Old North State, homeowners are pushing back.

The Department of Insurance received more than 24,000 emailed comments on the Rate Bureau’s proposal in January, with hundreds more policyholders commenting by mail.

“Scores more consumers spoke during a virtual forum,” Insurance Commissioner Mike Causey said on Feb. 6, just before he rejected the request , calling the proposed rates “excessive” and “discriminatory.”

Causey promised a “thorough review” and closed public comments. (Redacted public input can be found here .)

Causey and the Rate Bureau are now working to reach a settlement on a new rate. If they can’t agree, a court date has been set for Oct. 7. But nearly five months on, it’s unclear where the talks stand.

“We can’t comment on pending litigation,” said Barry Smith, a spokesman for the state’s Department of Insurance. “We’re continuing to review the data provided by the Rate Bureau.”

The News & Observer filed a public records request seeking more information on May 15. The request is still undergoing “legal review,” he said.

Brenda Wells, professor of risk and insurance at East Carolina University, said she expects talks to stay private and confidential. “No one in government is going to put any of this in writing, is my guess,” she said in an email.

Homeowners, meanwhile, say they feel increasingly shut out of the process. On community platforms like Nextdoor and Reddit, many have flocked to log complaints or swap tips as the affordability crisis deepens. Some, like Janet Rupert, are calling for answers.

“My takeaway is that we’re not being represented well,” Rupert said. “It’s getting to the point where we have very few options. Companies should be held accountable; I don’t see that happening.”

Behind closed doors

Causey’s headquarters occupy most of the 10-story glassy Highwoods Towers at 3200 Beechleaf Court in northeast Raleigh. Inside, the department’s actuaries, attorneys and consultants are working to ensure a proposed increase that is “reasonable and actuarially sound,” Causey said in January.

Like disputed filings before, negotiations are typically “tense,” said Joe Stewart, vice president for government affairs of the Independent Insurance Agents of North Carolina. They’re also, most likely, in person.

“It’s deep, dense conversations about sets of actuarial findings: a lot of scientific mathematical calculations, just going back and forth,” he said.

Though not privy to ongoing negotiations, Stewart, a lobbyist, spends most days pacing the halls of the state’s General Assembly, advocating for independent insurance agents. He said negotiators are collecting data from various sources, such as historical records, surveys, market research and external databases; then creating and validating risk models to determine a “new, fair rate.”

They’re analyzing a number of scenarios: the loss cost per unit of exposure; administrative expenses, or “loading,” and the profit that comes with insuring millions of dollars in property against future disasters. Ultimately, the commissioner’s job is to protect consumers by keeping rates as low as possible while maintaining a solvent insurance market.

“The key is finding a happy middle point,” Stewart said, something that’s “neither excessive nor inadequate.”

“It’s a delicate balancing act. The problem is, we’re kind of at the front end for the destabilizing consequences of climate change, he said. He pointed to states like Florida, where the legislature appropriated $250 million in March to subsidize the market. “That’s not what we want,” he said. “That’s money that would have otherwise gone to schools, hospitals, human services. That’s a terrible way to spend precious resources.”

North Carolina is one of the few states — if not the only one — where a Rate Bureau still exists. In almost every other state, each carrier files its own homeowners’ rates independently. But here, the Rate Bureau, created in 1977 by the General Assembly, has the responsibility to file and negotiate rates on behalf of the entire industry.

Experts say it’s anachronistic, a holdover from a bygone era. That’s not to mean it’s any worse, said Gina Hardy, CEO of the North Carolina Joint Underwriting Association (NCJUA) and the North Carolina Insurance Underwriting Association (NCIUA), the state-run insurance company that covers homeowners who can’t obtain coverage on the private market.

As the “insurer of last resort,” she said she’s “absolutely agnostic” about the Rate Bureau. But she believes North Carolina is better off than a lot of other states, such as Florida and California, where insurers are running for the exits and insurance availability is evaporating.

“You’ve got states right now that don’t have a Rate Bureau, and their markets are collapsing,” she said. “Good or bad, it’s the way our system functions.”

Insurance commissioner election

It’s been three years since the last rate increase — in November 2020 when the Rate Bureau asked for an overall rise of 24.5% and ultimately received 7.9%. But the timing, especially for the two-term commissioner, isn’t convenient.

Causey, a Republican, is up for reelection Nov. 5, casting an even greater spotlight on proceedings.

His challenger, state Sen. Natasha Marcus, a Democrat, has attacked his record. She’s also questioned his campaign-funding ties to the industry and his transparency.

“The best predictor of future behavior is past behavior,” she said in an email to The N&O.

In eight years as the commissioner, she pointed out, Causey has raised property insurance rates 16 times — all without a public hearing. Case in point: In June, he approved a dwelling-rate increase of 8%, canceling a July 22 hearing on the dispute. (Unlike homeowners’ insurance, dwelling policies cover the needs of landlords who don’t live on the insured property. It can also cover a home that is not owner-occupied or is valued below the minimum coverage limit available for a homeowners’ policy.)

“I feel confident predicting that he won’t hold a public hearing this time either,” Marcus said. “They don’t want the scrutiny that public hearings provide.”

On June 11, Causey offered a rebuttal. Defending his dwelling rates’ decision , he said settling and not going to court “saves consumers and taxpayers money and time.”

The last dwelling rates’ hearing , in 2011, under Commissioner Wayne Goodwin, lasted over 90 days — one of the longest administrative hearings in the state’s history. Goodwin ordered a small increase, which the Rate Bureau appealed to the state Supreme Court and lost. They eventually settled for an average 13.2% average increase, below the original 20.5% requested.

“Hearings are the exception,” Causey added, “when negotiations fail.”

‘Struggling to cover costs’

For its part, the Rate Bureau says it’s not backing down.

That’s despite a recent New York Times report that shows insurers, in fact, made money on homeowners’ insurance for most of the past decade in North Carolina. Except for 2018, when Hurricane Florence hit southern New Hanover and eastern Brunswick counties, the state’s insurers stayed in the black, the report said, even though the state dealt with seven separate billion-dollar disasters.

By contrast, in 2023 alone, insurers lost money on homeowners’ insurance coverage in 18 states, more than a third of the country, its analysis of newly available financial data found.

While acknowledging North Carolina’s better-than-average results in the Times report, Jarred Chappell, the Rate Bureau’s chief operating officer, said it doesn’t show the full picture.

State-by-state profit numbers are difficult to calculate, he said. That’s in part “because so many companies operate across state lines.” He also pointed to the report’s methodology, which didn’t include reinsurance payments. Reinsurance — the insurance that covers insurance companies — has skyrocketed in recent years, he said.

Risk analysis firm Guy Carpenter recently reported that reinsurance rates on property in the U.S. increased between 10% and 30% for loss-impacted residents in 2023.

“A single devastating storm can, in days, wipe out years of profit,” Chappell added.

Through the state’s consent to rate , roughly 40% of policyholders already pay premiums above the approved rate, Chappell said. “It’s a recognition that the risk is often higher than the commissioner’s approved rate can cover.” He added: “No one wants to pay more for insurance.” But if adequate rates cannot be achieved, policy cancellations will most likely become “more prevalent.”

‘Still anyone’s guess’

At this point, analysts say, it’s still too early to tell where talks will land.

Most say it’s not in either party’s interest to prolong the process. Carriers will only stay as long as the market remains buoyant; and no commissioner wants to preside over an availability crisis. While some predict a single-digit number “no greater than 9.9%,” it’s still just speculative.

“I have no idea what Causey is going to do,” said Don Hornstein , the Thomas F. Taft Distinguished Professor at the University of North Carolina School of Law.

Bottom line: “There’s going to be some increase whether it’s through a hearing or litigation,” he said. “The losses are increasing. There’s no silver bullet.”

NC Reality Check is an N&O series holding those in power accountable and shining a light on public issues that affect the Triangle or North Carolina. Have a suggestion for a future story? Email realitycheck@newsobserver.com