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Risky Drivers' Tab Would Be on Bills: Insurers Back Measures in Legislature

May 22, 2007

By David Ranii, The News & Observer, Raleigh, N.C.

May 23--RALEIGH -- Bills advanced Tuesday that call for auto insurers to disclose to consumers that policy holders are paying a surcharge to subsidize coverage for drivers deemed too risky to insure.

Critics of the bills contend -- and supporters deny -- that the companion measures in the House and Senate are part of a broader push to overhaul the way auto insurance rates are set in the state.

The bills, which are backed by auto insurers, moved to the full House and Senate for consideration after winning committee approvals Tuesday morning. The House bill was approved by a narrow 8-to-7 margin, giving hope to opponents.

Senate Majority Leader Tony Rand, who sponsored the Senate bill, argued that consumers should know they paid $250 million in surcharges to cover drivers in the state's high-risk pool last year. The bills call for that surcharge to be disclosed in information provided to consumers.

"North Carolina has the largest number of [drivers] in the reinsurance pool in the United States," Rand said.

North Carolina drivers whom insurers deem too risky to insure are relegated to the N.C. Reinsurance Facility for liability insurance. When premiums paid by those drivers are insufficient to cover claims, a surcharge is added to everyone's bill.

Last year premiums fell $249 million short of claims, triggering a surcharge of about 9.8 percent to auto liability premiums, or about $39 on average.

About 30 percent of the state's drivers are in the high-risk pool, versus an average of 1.9 percent in other states. The Insurance Federation of North Carolina, which represents property and casualty insurers, contends the large number of drivers in the pool shows the current system for setting rates isn't working.

But a lobbyist for the Independent Insurance Agents of North Carolina, which represents about 1,000 independent insurance agencies statewide, argued against the bill before the Senate Commerce Committee.

"We think it will cause confusion in the marketplace," said John Bode.

Insurers can shift drivers to the Reinsurance Facility for any reason. Many drivers in the pool are categorized as clean-risk -- experienced drivers with no points against their licenses -- and aren't aware their insurer has shifted them to the pool.

Insurance Commissioner Jim Long told the senators he wasn't against disclosure but argued that companies also should disclose additional information beyond the surcharge, including where the surcharge money goes. He said in an interview that he also would like insurers to inform drivers when they've been shifted to the Reinsurance Facility -- and why.

All bills must be approved by one chamber of the General Assembly by this week's "crossover" deadline to have any chance of becoming law during the current legislative session.

Staff writer David Ranii can be reached at 829-4877 or david.ranii@newsobserver.com.

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Copyright (c) 2007, The News & Observer, Raleigh, N.C.

Distributed by McClatchy-Tribune Information Services.

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