Homeowners rates could have political implications

Companies are asking for steep rate hikes while homeowners are balking, putting DOI Commissioner Mike Causey in the middle

The North Carolina Rate Bureau is asking for 42% increase in homeowners insurance in the state. Much of that increase would come from homes built along the coast. According to the NCRB request, insurance rates in far eastern North Carolina would go up between $500 and $1,000 per month. In piedmont counties, the increase would be a more modest $50 or so per month. Still, the request is causing quite an outcry.

The Rate Bureau is an independent entity that is not attached to the Department of Insurance, which actually would make the increases. The NCRB is more of an advocate for the insurance industry, whether it’s supposed to be or not. They are making the case that climate change is causing more damage to homes and that inflation is costing insurance companies more money. They are asking the Department of Insurance to keep the insurance industry profitable.

The NCRB doesn’t really expect to get the rate they are asking, but they do want to hike premiums by a significant amount. Asking for 42% is the start of a negotiation. Back in 2020, they asked for 25% and got 8%. This year, they are probably hoping for a double digit increase, but know they aren’t getting close their asking price.

Republican Mike Causey, the Commissioner of Insurance, is running for re-election. He’s not about to allow an increase of 42%. If he did, he might as well just quit the campaign. Those wealthy coastal homeowners who would pay the bulk of the increase are also mostly Republican voters. Causey isn’t going to alienate them in an election year.

Insurance rates could certainly turn into a political issue if they go up too much. Subtle increases of ten to fifteen dollars a month are largely tolerated or missed by most homeowners, but big increases could give them a shock. For most homeowners with mortgages, insurance is escrowed in their monthly mortgage payments and paid once a year to the insurance companies by the mortgage holder. Slight increases to mortgage payments may go unnoticed but larger ones won’t. In other words, politics is going to protect homeowners from large increases in insurance.

For perspective, North Carolina’s homeowners insurance is a little below the national average. We’re in line with states around us like South Carolina and Tennessee. Our vulnerability to hurricanes and rising sea levels keeps our rates a little higher than some states. More expensive housing going up in high risk areas like barriers islands and along lakes and sounds will probably continue to be a point of contention between homeowners and insurance companies.

All of that said, if insurance companies feel they aren’t making enough money from North Carolina homeowners or that their risk is too great, they will pull out of the state. For obvious reasons, mortgage companies require homeowners to carry insurance, so if nobody will insure houses, that could put a crimp in the real estate market. There’s a balance that the Department of Insurance must maintain. They need to keep rates as low as possible while keeping companies profitable enough to stay in the state. Screwing up the balance could have political repercussions at the DOI, in particular for Mike Causey.