Rate shock - homeowners pay more than approved increase
Some homeowners in the High Point area are finding what could be a startling letter in the mail from their insurance company about a suggested rate increase higher than the one allowed by state regulators.
State Farm Insurance recently sent letters to customers in the area asking for what’s known as a consent to rate increase. The practice, which isn’t reined in by state regulations, allows insurance companies to seek an increase that’s greater than the one allowed by the N.C. Department of Insurance.
Homeowners don’t have to accept the increase. But if they don’t, the insurance company can drop the customer, forcing the homeowner to find new coverage for their property.
One customer who contacted The High Point Enterprise said that the consent to rate increase requested from State Farm was 25 percent. By comparison, the N.C. Department of Insurance agreed to an overall statewide rate increase, which took effect July 1, of up to 7 percent for all property owners and insurance companies serving the state.
The customer who contacted the Enterprise didn’t want to be identified. But the customer provided a copy of the State Farm letter, which states that “the renewal premium offered to you by State Farm Fire and Casualty Co. will be based on a rate greater than rates of the North Carolina Rate Bureau.”
The letter contains a consent form to the increase that the homeowner is asked to sign and return to State Farm Insurance.
“Unfortunately, if we do not receive the signed form ... we will be unable to continue coverage,” the letter says.
Consent to rate is a “tool to allow companies to adjust rates on an individual basis where the customer agrees to do so,” said State Farm spokeswoman Anna Bryant. “If a customer chooses to not accept the offered rate, he or she has the ability to shop for an alternate option.”
State regulators have a role in overall rate increase requests that would affect homeowners across North Carolina. But the rules don’t provide regulators a role when insurance companies request permission from homeowners for rate hikes beyond those approved by state officials, said Kerry Hall, public information officer with the N.C. Department of Insurance in Raleigh.
The practice is used regularly by an array of insurance companies. Last year, 600,064 homeowners policies in North Carolina were written on consent to rate basis, according to Department of Insurance records.
The Department of Insurance offers advice to homeowners who face a consent to rate increase request. If homeowners receive a letter, they should consider contacting other insurance companies who might provide coverage at a lower rate than the one proposed by their current insurance carrier.
Also, Hall said, customers can call their existing insurance company and ask to renegotiate the terms of the policy to lower the premium.
“What we emphasize is don’t ignore the letter and allow for a lapse in coverage,” Hall said.
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