NC HomeownersInsuranceWillo Kelly – Government Affairs DirectorOuter Banks Association of RealtorsOuter Banks Home Builders Association
NC-20 • Background • Mission To support the common environmental and sustainable economic development interests within the 20 coastal counties
Property Insurance Overview • NC Rate Bureau - Territories • NC Department of Insurance Insurance Commissioner • Beach Plan/Fair Plan Beach Plan Board/Fair Plan Board • Voluntary Market, Surplus Carriers, Market of Last Resort • Policies: Dwelling/Homeowners/Wind Only
New Homeowners Insurance Rates Became Effective May 1, 2009The third such change within five years!
WHY? • Loss Experience • Storm Losses • Hurricanes • Increased Construction Costs • Risk • Modeling – Loss Projections
Rates per $75,000 of Coverage: 1993 2009 Charlotte $ 351 344 Gaston, Mecklenburg, Union 350 324 Ashe, Buncombe, Burke 319 312 Alamance, Guilford, Davidson 350 364 Carteret, Currituck, Dare, Hyde 578 1,379 Brunswick, New Hanover 578 1,522 1993 – 2009 Comparison
As of May 1, 2009 Policyholders in 32 Counties and the City of Charlotteare paying less for Homeowners Insurance than they did in 1993!
2008 Rate Filing Data2001-2005 Four hurricanes made landfall on the Coast: Isabel, Alex, Charley and Ophelia Five other hurricanes affected the state: Francis, Gaston, Ivan, Jeanne, Cindy
Comparison of Losses Total Statewide Losses - $2.47 Billion 18 Eastern NC Counties - $259 Million 82 Other NC Counties - $2.21 Billion 18 Eastern NC – 10% 82 Counties – 90%
Wind Losses2001-2005 18 Eastern NC Counties - $121,297,407 82 NC Counties - $411,154,637 18 Eastern NC Counties – 23% 82 NC Counties – 77% The 29 western NC County Territory of Ashe, Buncombe, Avery, Catawba, Macon, etc. incurred $35 million more in wind losses than the 18 Eastern NC Counties.
Average Premium Dollar Paid for Losses 2001-2005 Currituck, Dare Hyde- $0.06 Brunswick, Carteret, New Hanover, Onslow and Pender – Barrier Island Area $0.07 Ashe, Avery, Buncombe, Catawba, Madison $0.21 18 Eastern NC Counties - $0.12 82 NC Counties - $0.17
Beach Plan House Bill 1305 Ratified August 6, 2009 – Changes to Beach Plan (NCIUA) Renames Beach Plan the “Coastal Property Insurance Pool”.
Beach Plan Changes • Maximum Coverage Limits lowered from $1.5 million to $750,000 • Deductible of 1% per named storm; other deductibles to be allowed • Personal property lowered to 40% • Mitigation credit schedule to be established • Public notice of Rate Bureau filing
Beach Plan Changes NO NEW SURCHARGES – any future surcharge increase will have to be approved by the NC General Assembly. A SAVINGS OF OVER $15 MILLION TO EASTERN NC POLICYHOLDERS
Beach Plan Changes Companies statewide have non-recoupable assessment cap at $1 Billion. Recoupable assessments – 10% per policy until losses “recouped”. No distribution of surplus.
Other Provisions in HB 1305 The Association shall be audited on an annual basis by an auditor selected by the Commissioner. Each member company shall report by February 1 of each year to the Commissioner the amount of coverage written in the preceding year in the beach and coastal area.
What Happened? • State Farm abandons 1,600 beach area policyholders. • Nationwide tells policyholders “no more wind coverage”. • Legislative Research Commission MAY study ……??? Shall submit a final report to the 2011 General Assembly?
January 2011 • Dwelling Policy Rate Filing – unwarranted, unsubstantiated • Public Comment Session Held • Beach Plan ordered to “retrieve” $16 million in illegal distributions • Commissioner Goodwin asks for PAC money contributions for 2012 campaign prior to start of session
Dwelling Rate Filing • “Represents 20.9% average increase statewide” • Two components of dwelling policies: • Fire • Extended Coverage: includes windstorm and hail
Dwelling Rate Filing • Average statewide wind increase of 42% • Proposed coastal wind increase of $1,000 on a $300,000 structure • Proposed coastal rates are up to 10 times higher than the rest of the state • Increases impact housing costs • Dwelling wind was surcharged May 1, 2010 • Building base rate change of 16.4%/2.5%
Proposed Wind RatesPer $15,000 Coverage Current Proposed • Charlotte 14 22 • Gaston, Mecklenburg, Union 16 24 • Ashe, Buncombe, Burke 20 30 • Alamance, Guilford, Davidson 21 26 • Carteret, Currituck, Dare, Hyde 171 222 • Beaufort, Jones, Washington 100 139
Dwelling Rate Filing • Losses adjusted to a $250 “standard” deductible; does not factor in 1% named storm deductible • Does not consider NC Building Code • Beach Plan Dwelling Wind increased in 2010 • Actual Cash Values vs. Replacement Cost Exposure • Shows increased repair costs
Be Informed Check the “Dwelling” value on your policy. In many cases, this amount is overvalued and could have increased without notice or explanation. Recent policy review shows a 7.8% inflationary factor applied to dwelling values at policy renewal. Your dwelling value should be the cost to rebuild only the structure – not the cost of the driveway, septic system, bulkheading, engineering/surveying costs, decks, etc. Your premium is based on the dwelling value on your policy and is typically not the market value! Contact Your Agent
Long-Term Solutions Ask legislators to: Address statewide property insurance reform! Enforce Section 8 of HB 1305 and have the Legislative Research Commission study the rate making process and the feasibility of an Insurance Commission.
Increase industry transparency by establishing mandatory catastrophe reserves for property and casualty companies; establish a statewide catastrophe fund. Catastrophes include not only hurricanes, but tornadoes, wildfires, ice storms, etc.
Willo Kelly email@example.com (252) 202-7927