North Carolina’s Auto Insurance System desperately needs a facelift.The present system is overcharging the good drivers, undercharging the bad ones, while guaranteeing profits to the private companies. This is totally outrageous and needs to be revamped.
Hence, this has brought about the need for change and the government, advocacy groups, and the insurance industry have all woken up and come forward with some modification plans. But all of these plans are far from perfect because there are some of them that take away the protections and there are the others that don’t go all the way in changing the system. All the different sectors such as the citizen’s group, insurers, elected leaders etc., must come forward and reach a consensus where hidden costs and guarantees of profits are done away with.
There are multiple private auto insurance companies but the North Carolina automobile insurance is one of its kinds. The industry-run Rate Bureau has a set rate plan, and all the insurance providers follow that. This bureau is a multimillion dollar organization and the running costs of this bureau are incorporated into the auto insurance premiums for all policy holders. When this rate plan is approved by the insurance commissioner he has to guarantee that the industry will make profits. If the policy is not profitable for the company then they can ‘cede’ this to the ‘reinsurance facility’ that is mandated by the government. This facility shares the personnel and staff with the Rate Bureau and also loses a lot of revenue on most of the policies it writes.
In order to make up for these losses that comes as a result of the bad drivers that the insurers don’t cover under their rate plans, there is a special tax that is imposed called the ‘clean risk surcharge’ which is almost $100 for a regular driver in the worst years. This is added on to all insurance policies in the state and this causes a steep increase in rates even for the best drivers, which is unfair.
If this system needs to be fixed the legal profit guarantee that is given to these insurance companies must be totally abolished by the legislature. There is a ‘prior approval system’ in some parts of North Carolina where the government has to give its approval before the companies can charge. This system should be allowed to continue but the insurance commissioner should not feel obligated to assure any profitability for these private companies.
