More NC residents are losing home insurance as underwriters tighten guidelines

First-time homeowner Tamara Matheson is still trying to figure out why she got dropped from her home insurance coverage.

On Jan. 19, she received a letter from Farmers Insurance, one of the nation’s top insurers, that after reviewing her file, they were unable to insure her 1947 ranch-style home in Mebane.

Though she said she’d never filed a claim during her four years as a policyholder, her consent-to-rate premium “exceeds 250% of the N.C. Rate Bureau premium,” the company said.

In other words, the price of insurance has outstripped the state’s current threshold, written into law, that allows insurance companies to charge rates higher — up to 250% — than the state-approved rate.

Farmers says getting two and a half times the allowable rate is still not enough. Rising construction and labor costs, among other cost drivers, are making it harder for them to operate in the state. The Rate Bureau and the state are currently trying to reach a settlement on a new rate.

“It’s kind of insane to me that they require such exorbitant amounts of money to be covered,” Matheson told The N&O in a phone call.

Farmers gave Matheson a 60-day notice and said it would end her policy effective March 19. Her bank, Coastal Federal Credit Union, informed her that if she failed to obtain new coverage, it would purchase a policy for her, but it may be “significantly more expensive” than the insurance she can buy for herself.

Matheson joins a growing number of homeowners across the state who’ve faced skyrocketing premiums in recent years.

In 2020, the 41-year-old nurse bought her three-bedroom, one-bathroom home close to Mebane’s downtown for $183,000 — a relative steal these days in the fast-growing blue-collar town just outside the Triangle.

Since then, she’s seen her insurance premiums almost triple. She now pays roughly $1,500 a year, up from $500, which she finds hard to justify. (About 40% of policyholders in North Carolina pay premiums above the approved bureau rate, a Charlotte Observer analysis found. On average, affected homeowners paid $321 more for their annual coverage in 2021.)

“We don’t have floods where I live. They’re making us pay even though we don’t live in an area that’s high risk.”

A month after being dropped, Matheson said she’s found another insurance provider, but it comes with trade-offs. In exchange for lower monthly payments, she’s getting less coverage, including protection for her outdoor sheds.

“I’m concerned for other people who may have to do the same, or who can’t afford the higher insurance costs,” she said.

Carly Kraft, a spokesperson for the Los Angeles-based Farmers, confirmed the company has not renewed all policies where the consent-to-rate premium “exceeds 250%.” But it impacts “less than 5%” of its policyholders in the state, Kraft said. She stressed the company is not pulling out of the state. (Last July, it stopped insuring properties in Florida, CNN reported.)

“Farmers continues to offer a broad suite of products and services,” Kraft said.

On-going rate debate

In January, the Rate Bureau, which represents companies that write insurance policies in the state, asked for a 42.2% average increase, which it said insurers needed to cover rising costs and the current economic “reality.”

Insurance Commissioner Mike Causey rejected that request earlier this month.

If they can’t agree, a hearing has been scheduled for Oct. 7.

Jarred Chappell, the Rate Bureau’s chief operating officer, said he’s not surprised that insurers are being more selective. If adequate rates cannot be achieved, reports of policies not being renewed may become “more prevalent.”

In October, another major insurer, Nationwide, pulled out from part of the state, not renewing some 10,000 insurance policies in Eastern North Carolina.

To date, however, the fallout appears to be contained.

“We’re not aware of any large writer of homeowners insurance who has elected to discontinue writing policies in North Carolina,” said Barry Smith, a spokesman for the N.C. Department of Insurance.

But if Nationwide and its affiliates, which write about 7.3% of the state’s homeowners insurance policies, decide to pull out of larger swaths, or abandon the state entirely, it could wreak havoc on the state’s insurance market, experts warn.

Competition would be stifled, driving prices up even further, said Brenda Wells-Dietel, professor of risk and insurance at East Carolina University.

She expects the situation will get worse before it gets better.

“My best advice is to start reallocating some of your budget to higher homeowner premiums. They’re on the way with higher deductibles and out-of-pocket costs.”

NC Reality Check is an N&O series holding those in power accountable and shining a light on public issues that affect the Triangle or North Carolina. Have a suggestion for a future story? Email realitycheck@newsobserver.com