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Today, members of the Automobile Insurance Modernization Joint Select Committee will revisit proposals by the insurance industry to drastically alter auto insurance regulation. The Committee was created after two bills, S900 and S901, failed to pass in the 2007 legislative session as a result of consumer backlash.
In the 2007 session, the insurance industry proposed new laws that would preclude the Office of the Insurance Commissioner from ensuring that consumers pay a reasonable price for insurance. Furthermore, industry proposals would also shrink the reinsurance facility for “high-risk” drivers, forcing those drivers into the voluntary market and driving up rates for all consumers.
“In a captive market, where consumers have no choice but to buy insurance in order to drive a car, the citizens of North Carolina need a Commissioner with the authority to set fair, affordable rates.” stated NCPIRG Advocate Rob Thompson.
Industry proposals would allow individual companies to raise rates as often as they like, with no prior approval from the Commissioner or a judge, which could lead to “rate shock” for consumers. Even worse, consumers aren’t guaranteed a full refund for rate hikes that are deemed excessive.
“This bill would legalize price gouging by the insurance industry,” continued Thompson.
Under the current system, the insurance industry applies for a rate increase to the Commissioner, who then uses industry’s proposal to set rates that are fair for both business and consumers. If industry does not agree with the rates set by the Commissioner, it can appeal to the North Carolina Court of Appeals. In the last 22 years, industry has appealed only six times and the Court has upheld the Commissioner’s rulings each of those six times.
The insurance industry has proposed a system in which companies would set rates that would immediately take effect. The Commissioner would then be forced to appeal those rates to a judge in one of North Carolina’s Business Courts, shifting the burden of proof from the insurance industry to the Commissioner, who is charged with ensuring that consumers get a fair shake.
“Why should the consuming public bear the burden of proof when the insurance industry is the one asking for a rate hike?” questioned Thompson.
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