Is The Consent To Rate Letter Stealing Power From The NC Rate Bureau?

I remember a day, not so long ago when if we ever needed to have a client sign a consent to rate form, then we had to spend some time finding one to use.  This usually happened when someone had such a bad driving record or was considered such a poor risk that the insurance company needed to charge much more than the maximum rates allowed by law on their auto insurance policy in order to be comfortable writing the policy.  Today, with the market for NC homeowners insurance in such disarray, the consent to rate form has become much more common place than any claims forms ever would be.  This new trend has me thinking about how this overuse of a once rare loophole must leave the NC Rate Bureau feeling like they are losing their grip on the insurance rate rules in this beautiful state. 

Let me start with a warning to anyone who may have received a consent to rate form from their insurance company.  Don’t just sign and return this form without taking some time to check out your options.  This doesn’t mean that you should ignore this form completely, because doing that could leave you with no insurance at all.  But I want you to know that in most cases you have other options and that blindly signing this form will almost certainly mean that you will end up paying much more for your homeowners insurance policy than you need to.  To learn more about the consent to rate form and what it means for you and your insurance rates, please read my blog about that by clicking here.

Let’s begin with a bit of background about how insurance rates are created in NC, so that you can understand how this previously benign little form is starting to usurp the power of the NC rate bureau.  In the state of North Carolina, insurance rates are controlled by the NC rate bureau and approved or not approved by the NC Insurance Commissioner’s office.  The rate bureau establishes a maximum rate that can be charged for the different kinds of insurance policies sold in NC.  What usually happens with most insurance products is that the individual insurance companies then file rate credits to offer rates somewhere below this maximum rate.  In NC, insurance companies have been losing money on homeowners insurance policies for so long that the entire marketplace is under enormous pressure to stop the bleeding.  This has meant rate increases for home insurance in NC but many insurance companies are also using the consent to rate form to charge a much, much higher rate to a selected group of their customers while still offering the much lower rates to their more preferred clients.   The consent to rate form, once signed by a homeowner, simply gives the insurance company the power to charge more than the maximum rate allowed by the rate bureau for just that customer who signed the form.

When these forms were only occasionally used for a very small fraction of policy holders each year then it was being utilized in the manner in which the rate bureau intended.  The beauty of this form is that it allowed an insurance company the flexibility to adjust the rates enough to allow it to place insurance for special situations.   But now we are seeing insurance companies mailing consent to rate forms to large blocks of their homeowner customers.  Some may be sending the letter to as many as 25% of their home insurance customers in NC.  When that happens, and when a significant number of them sign the form and return it and then pay the increased rate, then in effect, we have created a new, more unregulated insurance rate making program that effectively makes an end run around the NC rate bureau.  I am openly wondering what the powers that be in the NC rate bureau feel about this technique and what it does to erode their power to make and enforce insurance rates in North Carolina. Are the ok with homeowners rates for some portion of our population turning into an unregulated wild west where the ignorant and the less informed pay as much as 300% more than they would have to with a clearer understanding of their options?

At Clinard Insurance Group, we insure thousands of families all across North Carolina.  We have options for those who are being nonrenewed or who have received consent to rate letters from their insurance companies.  If you receive a consent to rate letter from your insurance company, please don’t simply sign and return it.  Call us, we will help you explore your options in great detail, taking as much time as you need to fully understand your choices.  You don’t have to pay 2 or 3 times the maximum state allowed rate for your home insurance.  We want to help, just give us a call, toll free at 877-687-7557.