Tarheels Dig In Against State's Insurers
Summer hurricanes haven't rolled in off the Caribbean yet, but the news from some southern states isn't good for property insurers, especially Progressive Corp. and GEICO, which specialize in auto coverage.
Florida continues to duke it out with State Farm, the nation's largest property insurer, over whether and when it will leave the state.
Texas is another hard to (pan)handle problem. The Texas Windstorm Insurance Association has ended up on the brink of insolvency after paying Hurricane Ike claims, and insurers there are also making noise about leaving.
Now we have North Carolina. The Tarheel State ordered auto insurers to roll back their rates to 2006 levels and give $50 million in refunds to about 1 million policyholders, according to a settlement announced yesterday by Insurance Commissioner Wayne Goodwin.
The settlement appears draconian. It does away with a rate increase of 9.4 percent that was approved in 2008, denies insurers' 2009 requests, and further decreases rates another 5 percent. Rates are locked in through 2011.
But there's no indication that the cost of fixing a car is going down. In fact, it's going up, as are medical costs when a serious accident occurs. And those costs are borne by the insurers, who are now getting less money.
North Carolina isn't the biggest state for auto insurers, but it's not the smallest either, ranking 24th in terms of profits in 2007, according to Auto Insurance Report. More important, however, is the reason behind the move. "In this economy, every dollar counts," said Goodwin.
Does it sound like the commish is giving North Carolinians a de facto tax cut at the expense of insurers? Yes indeed. As the industry will tell you, insurance commissioners love to become governors, and there's no faster way to do this than beat up auto insurers.
Insurers better hope that other commissioners don't take notice of what Goodwin is doing. Tapping into insurance companies' pocketbooks is a good short-term fix and makes taxpayers feel better. But just wait until the next hurricane hits.