The editorial in “The Observer”, last Monday, advocated that the bill to bring about changes to the auto insurance system in North Carolina be rejected. However, in reality the auto insurance system in this state is among the most outdated systems in the country and is in desperate need of a significant overhaul.
As per the current system that is in existence in this state, the insurance providers in this region have to be Rate Bureau’s members. This bureau is in-charge of proposing rates that can either be approved or rejected by Wayne Goodwin, the Insurance Commissioner. Goodwin also sets a rate cap as a result of which high-risk drivers end up being under charged and low-risk drivers end up being over charged. Insurance companies are guaranteed profits from this system. It is the policy holders who suffer the brunt of this unfair policy in existence.
Added to this, there is a pool of secrecy associated with this system. Losses totaling to $900 million between 2004 and 2009 as a result of subsidies to high risk drivers in North Carolina have been hidden by the law. Though a number of insurance companies want these losses to be more transparent, the Insurance Commissioner recommends that is stays hidden.
People who are in favor of the current system argue that no change should be brought about since NC is the 8th state in the rank of state with low “average” insurance rates. It is to be noted here that that word “average” does not imply to the costs all drivers have to bear. It does not change the fact that high risk drivers are paying less for their policy while the low risk drivers are paying more than they should be. The “average” cost calculated does not include the surcharge which is hidden from the consumers by insurers.
In order to make the system fairer and just, there is a need for the approval of Senate Bill 490. This bill has been designed to identify and change the current working system in terms of auto insurance.
As per the norms of this bill, customers should be made well aware of all the costs they are paying for, including the surcharge. Also, the surcharge being paid by the low risk drivers just because the high risk drivers are paying way lesser for their policies will be eliminated once the bill gets approved. In addition to this, there are a number of other points covered to ensure the entire system is made more transparent and works in the favor of consumers as well as insurers.
