By David Ranii
The
state's auto insurers want you to know that there's a surcharge tacked
onto your insurance bill to subsidize coverage for drivers deemed too
risky to insure.
Highlighting
that fee -- by disclosing it in information sent to consumers -- is
part of the industry's attack on the way the state sets insurance
rates, which differs from all but a few states.
A
bill -- recently introduced in the General Assembly at the urging of
the insurance industry -- would require insurers to report to consumers
the surcharge they pay to subsidize coverage for high-risk drivers.
Current law doesn't permit such a disclosure.
The
bill's sponsor, state Senate Majority Leader Tony Rand, said most
people don't realize they are paying more. "We're trying to get truth
in rates," he said.
Rand
also is spearheading a broader push, supported by the insurance
industry, to reform the way that automobile insurance rates are
regulated in North Carolina. He is sponsoring a separate bill, also
backed by insurers, that would strip the state insurance commissioner
of the ability to set rates on auto, homeowners and workers'
compensation insurance.
Consumer
advocates and Insurance Commissioner Jim Long said the bills would
unnecessarily change a system that enables North Carolinians to pay
some of the lowest auto-insurance rates in the nation.
Rob
Thompson, advocate at the N.C. Public Interest Research Group, said the
disclosure bill appears to be aimed at igniting a "consumer uproar"
that isn't warranted, given the state's low rates. Long said that
changing the rate-setting system would lead to higher premiums.
But
the number of drivers in the state's high-risk pool -- nearly 30
percent, compared with an average of 1.9 percent in other states --
shows that the current system isn't working, said Joe Stewart,
executive director of the Insurance Federation of North Carolina, which
represents property and casualty insurers.
In
North Carolina, drivers who insurers deem too risky to insure are
relegated to the N.C. Reinsurance Facility. The facility includes only
liability insurance, which state law requires drivers to have.
If
the premiums that those drivers pay don't cover their claims, a
surcharge is added to everyone's bill. Last year, the premiums that
motorists paid fell $249 million short of claims.
The
current surcharge adds 9.8 percent to auto liability premiums, which
amounts to $39 for the average liability premium, according to the
Reinsurance Facility. "The losses [experienced] by the high-risk pool
are subsidized by all the rest of us," Stewart said.
However,
Long objects to singling out the surcharge that drivers pay. "There is
actually a subsidy in every kind of insurance you buy," Long said. In
the health insurance arena, younger people subsidize the rates paid by
older people, who tend to have more health problems.
Long
said he could go along with disclosing the surcharge if the industry
would provide similar disclosures with other types of insurance bills.
"That's the fair way of doing it," he said.
Long
contends that the number of drivers in the Reinsurance Facility pool is
an indication that insurance companies are "gaming the system."
Insurance
companies use the Reinsurance Facility to "get rid of high-risk
drivers" they don't want to insure, based on their own analysis, Long
said.
Insurers
can shift drivers to the Reinsurance Facility at their discretion, for
any reason. Many of those drivers are categorized as clean-risk -- that
is, they are experienced drivers who don't have any points against
their licenses. Most clean-risk drivers aren't aware that they are in
the Reinsurance Facility, because they pay their premiums to an
insurance company.
Some insurers shift 90 percent or more of their customers to the Reinsurance Facility, Long said.
The
Insurance Department boasts that the state's auto insurance rates are
the fifth-lowest in the nation, but that doesn't include the surcharge.
Spokeswoman Chrissy Pearson said the department calculates that North
Carolina would rank sixth-lowest if the surcharge were included.
