N.C. Commissioner Settles Trio of Auto Rate Cases

North Carolina Insurance Commissioner Jim Long announced the resolution of three auto insurance rate cases – a settlement that will result in potential maximum savings of $1.2 billion for North Carolina drivers. Long negotiated the record-breaking settlement during talks with industry representatives this month.

The three cases that are resolved are the 2001, 2002 and 2004 cases. Auto insurance rates are filed every year by the North Carolina Rate Bureau, a private organization representing all private passenger auto insurance companies in the state.

Department of Insurance rate attorneys and actuaries review the yearly filings and attempt to come to an agreement with the Bureau on what is a reasonable rate to charge. If no agreement is reached, the case goes to hearing, where Long serves as hearing officer. He hears the case and makes a determination as to what rate should be set.

If the Bureau disagrees with the ruling, which is reportedly often the case, it can appeal to the state courts system first to the Court of Appeals and then to the Supreme Court. In Long’s 20 years on the job, he has ordered rate decreases in 10 cases, five of which have been appealed by the Bureau.

After a lengthy appeals process for the 2001 case, the North Carolina Supreme Court ruled in Long’s favor last month. Long had ordered a 13 percent decrease after the Bureau requested a 10.5 percent increase. While the case was on appeal, the industry went ahead and raised rates by 5 percent.

“If you were a driver in North Carolina during 2002, when the ’01 rates took affect, you may have paid too much for your auto insurance,” said Long. “I find this unacceptable and the Supreme Court agrees. If you are one of the thousands who paid too much, check your mailbox. You will be getting a refund check in October.”

State law allows companies to raise rates during the appeals process, but the difference between the ordered rate and the implemented rate must be held in escrow pending a resolution. If, as in the 2001 case, the appeal is denied, companies must refund that money plus interest. The 2001 case could result in up to nearly $436 million in potential refunds.

Also settled was the 2002 case, in which the Bureau asked for a 5.9 percent increase but Long ordered a dramatic 17.8 percent decrease. This case could result in up to $244 million in refunds, due out in November.

This year’s case, due to go to hearing on July 26, was also resolved. In February the industry requested a 12.2 percent increase that could have cost drivers nearly $390 million in increased payments. Long closed that case by negotiating no change in the rates from 2003, meaning rates will not have an opportunity to rise before Oct. 1, 2005.

While refund checks are expected to be widespread during October and November, not every driver will see a refund. Many drivers already receive discounts from their insurance companies, and they may not have overpaid.