Some insurance companies report record profits amid NC rate hike request

RALEIGH, N.C. (WNCN) – As North Carolina’s insurance commissioner weighs a proposed 42 percent increase to homeowners’ insurance rates, a Wall Street Journal report Thursday highlights companies that are reporting a surge in profits.

The North Carolina Rate Bureau, which requested the increase, noted that since the last increase was approved in 2020 insurance companies have dealt with inflation, rising material and labor expenses and increases in the cost of covering catastrophic claims.

While the average increase is 42 percent, the proposal varies significantly across the state. In some beach communities, the proposed increase is 99 percent compared to some western mountain counties where it would be 4 percent.

“I’m hearing from my friends who know I’m an economist all the time now. I mean, this is eye-catching,” said economist Mike Walden.

The Journal reported Thursday that Travelers saw record profits in its fourth quarter, and its stock jumped to a new all-time high this week. Progressive also reported its profits more than doubled compared to the previous year.

“What they are saying is that they lost heavily during the pandemic and that they are now just back to putting their heads above water in terms of profits,” said Walden.

During a public forum this week held by the Department of Insurance, many outraged homeowners and elected officials blasted the proposed request.

“It’s hard to swallow that this increase would be necessary given the salaries that the CEOs of the major insurance companies take,” said Mike McHugh, executive director of the Swansboro Area Chamber of Commerce.

Insurance Commissioner Mike Causey (R) did not attend the forum, which agency spokesperson Jason Tyson said he was advised not to do by legal counsel so as to maintain impartiality.

After the forum, Causey released a lengthy statement acknowledging people are “worried” and saying “they’ve got good reason to be concerned.”

“During this 50-day review period, which expires on February 22, the Department’s actuaries, attorneys and consultants are working tirelessly to determine whether the Rate Bureau’s proposed increase is ‘excessive, inadequate or unfairly discriminatory,’” Causey said. “If it is, I will call for a hearing on the matter and will fight for our consumers to ensure that any proposed increase is reasonable and actuarially sound.”

In its article, the Journal noted that many of the pressures facing the insurance industry have eased as the inflation rate has come down significantly along with repair and replacement costs.

The Dept. of Insurance noted that since Causey was first elected in 2016, the agency has negotiated requests like this down. In 2020, the bureau asked for a 24.5 percent increase that ultimately went down to 7.9 percent.

In an interview earlier this, Jared Chappell, the chief operating officer for the NC Rate Bureau said this latest request of 42 percent is not a negotiating tactic.

“It’s just what the data reflects. I mean, it’s complicated. There’s roughly 2,000 pages of data that we turn in with the filing. But, it boils down to claims and expenses versus premiums paid,” he said. “There’s no fluffing of the number to try to negotiate higher. It’s what the data says.”

He also pointed to issues in states like Florida where insurers have been leaving.

“I also understand that we need to maintain a healthy insurance market in the state as well. It’s pretty critical. Or, we could end up in situations like what you see in some other states in the country where insurance companies are pulling away,” Chappell said.

In a call with investors, executives at Travelers said they expect renewal rates to increase in the “moderate to low double digits in 2024.”

Walden, the economist, said he questions whether North Carolina and other states should continue using this system where the bureau makes a request like this to an independently elected commissioner to consider.

“As an economist, I have to say I agree in competition. I think that’s what holds companies’ feet to the fire in order to provide consumers with products they want but at the lowest possible cost,” said Walden. “We know insurance rates are going to go up. But, the question is how do we determine that? And, do we let negotiation between a commissioner and companies determine that. Or do we let the free market play it out and let the companies do battle?”

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