North Carolina is ordering auto insurers to roll back their rates to 2006 levels and send up to $50 million in refunds to about 1 million policyholders.
Insurance Commissioner Wayne Goodwin said the settlement does away with a rate increase of 9.4 percent implemented in 2008 and denies insurance companies’ 2009 request for an additional 1.4 percent rate increase. It further decreases rates another five percent.
The settlement with the industry’s rating organization, the North Carolina Rate Bureau, will go into effect on Nov. 1, and the rates are retroactive to Jan. 1.
Under the settlement, the NCRB may not file changes to auto rates until 2011, which means that the maximum allowable auto rates are locked in until Oct. 1, 2011 at the earliest.
According to Goodwin, the deal saves North Carolina policyholders an estimated $545 million over this time period.
“I’m thrilled that North Carolina drivers will see a decrease in their auto insurance rates,” said Goodwin. “Drivers will not only see lower rates, but many will also receive refund checks beginning in mid-2010 that may together total more than $50 million. In this economy, every dollar counts, and I am committed to protecting consumers through fair ratemaking.”
The refunds stem from a dispute between the state insurance department and the NCRB over rates ordered in 2008. During the appeals process, the NCRB implemented an interim 9.4 percent rate increase that went into effect on Jan.1 of this year.
In cases where insurance companies charged policyholders more than the rates determined by this settlement, insurance companies are required by statute to refund the difference between the rates charged and the settled rates, with interest.
With this rate rollback, the effect is that rates will have been capped for the five-year period spanning from 2006 through 2011, according to Goodwin.