The bill that could have reformed North Carolina’s car insurance system might now be rejected as the Observer’s editorial ‘Foul Play’ has urged last Monday.
The auto insurance market in the state has needed revamping for a long time now and it has been long overdue. The entire system is outdated and it seems the last of its kind in the entire nation.
Under the present system, all the insurance companies come under the direct control of the Rate Bureau that proposes that one standard rate either be approved or disapproved by Wayne Goodwin, the Insurance Commissioner. Once the rate has been fixed by the Rate Bureau, the commissioner sets a rate cap which results in low-risk drivers being overcharged while the high-risk drivers are usually undercharged. This system also guarantees profits to all the insurance companies. Now, most people want to know if any of this is fair.
The losses of the high-risk drivers who are in the high-risk pool are being subsidized by the drivers in North Carolina. This amounts to a tune of $900 million during 2004 to 2009 alone. This is enough proof that the whole system is dysfunctional. The subsidy is also hidden by the law and not by the insurance firms. A majority of the insurance industry supports the disclosure to the public. However, the insurance commissioner wishes to keep this under secrecy.
There are also other arguments where some sections argue that North Carolina has the eighth lowest average in the country and hence does not need any fixing. The main keyword seems to be the word ‘average’ and the way the premiums are distributed among the drivers. The present ‘rate capped’ system is enforcing higher premiums among low-risk drivers and lower premiums for the high-risk drivers. The so-called ‘average’ premium that the others boast of also does not include any hidden surcharge. When that is put into the equation, the entire picture is different.
The Senate Bill 490 will make the system much fairer to all the customers. This will also begin to not only address but also change the fundamental flaws that are embedded in the system and it includes:
- The hidden surcharge that would be disclosed to the customer. The customers will also know what they pay and why.
- The surcharge that is paid by the low-risk drivers would also be eliminated and those in the high-risk pool will actually be made to pay the higher premiums.
