New rates for homeowners insurance will go into effect on June 1. The North Carolina Department of Insurance announced the new rates on Jan. 17.
The insurance industry says inflation and climate change are driving up costs.
WUNC Host Will Michaels spoke to WUNC Environmental Reporter Celeste Gracia about the new rates.
This conversation has been lightly edited and expanded to provide additional context and details.
Before we talk about the new rates, how did we get here?
In January 2024, the North Carolina Rate Bureau proposed a 42% statewide average rate increase. The Rate Bureau is a group that represents all the insurance companies that do business in North Carolina.
The most significant proposed rate increase was 99.4% in southeastern coastal counties, including Brunswick, Carteret and New Hanover counties.
After a public comment period where thousands of citizens asked North Carolina Insurance Commissioner Mike Causey to deny the proposed rates, Causey did just that.
“In my view, the original amount that was requested by the North Carolina Rate Bureau was excessive and… unfairly discriminatory to certain parts of this state,” Causey told WUNC.
That led to the Rate Bureau and the North Carolina Department of Insurance going to court to settle the rates. This was actually the first time in Causey’s tenure that this issue got to the courts. Usually, the two groups are able to negotiate outside of court.
“We did try numerous times to negotiate a settlement throughout (last) summer, but the reality was both sides were so far apart, the only choice was to go to court,” Causey said.
The court case started in October and went through December. Finally, after three months, the Rate Bureau approached Causey and the two sides were able to come to an agreement.
And that agreement was announced last Friday. So, what are the final rates?
The average statewide rate will increase by 7.5% on June 1 and then increase again by the same amount on June 1, 2026.
The proposed rate increase of 99.4% for those southeastern coastal counties was negotiated down to 16%, but it’s a 16% increase this year and then another 15.9% in 2026.
Also, the Rate Bureau cannot ask for another rate increase until 2027. Causey said he considers himself a consumer advocate.
“Nobody wants any increase, but the reality is with inflation and what these companies are spending out in claims, it was necessary,” Causey said. “The rates have to be adequate for that company to have the financial reserves to pay claims and future claims.”
Causey mentions inflation as a reason why rates are going up, but it sounds like climate change is playing a role.
Absolutely. We spoke to Greg Characklis about this. He’s a professor of environmental sciences and engineering at UNC Chapel Hill.
“Insurance of any kind is made possible by the ability to estimate the probability and the size of the covered losses. How often will they occur? And how severe will they be?” Characklis said. “So, climate change is one factor — one of several — that’s making the probability and size of the losses larger and at the same time more difficult to estimate.”
And this is something that we’re seeing across the country as climate change continues to be an increasing threat.
Characklis added another factor driving up costs is more developments in high-risk areas, such as along the coast.
“To the extent that we see more frequent and severe weather events, that the cost of construction continues to rise, and that we keep building in high-risk areas, it seems that the rates are likely to continue to rise,” Characklis said.
After the settlement was announced last week, the North Carolina Rate Bureau said in a statement that while these rates are a step in the right direction, they are not adequate.
“Storms have gotten stronger and more damaging, more people are living in disaster-prone areas, inflation in the construction industry has been particularly high and reinsurance costs have exploded. All these cost drivers remain an issue,” the Rate Bureau said. “Unfortunately, when the two years covered by this settlement are up, we will almost certainly be in a similar position, calling for a significant increase to keep the North Carolina market strong.”
