Rate Bureau protects vested interests, not consumers
A recent Star News editorial on auto insurance reform in North Carolina (“Don’t let companies wreck state’s auto insurance system,” May 24) argues that allowing companies to opt out of the North Carolina Rate Bureau “would eventually tear apart the system that has kept rates and the market competitive.”
In truth, the rate bureau is the opposite of competition — a legally mandated, but privately run cartel through which insurers collectively set both rates and the terms and conditions of coverage for insurance products. That’s why every other state in the union abandoned rate bureaus a long time ago.
It bears noting that the companies fighting to reform the system – State Farm, Geico, Allstate and Progressive – are also the four largest auto insurers in the United States. They rose to the top by offering the most attractive products at the most attractive prices in every state in the union.
By contrast, reform opponents Nationwide, N.C. Farm Bureau and GMAC control 34.1 percent of North Carolina’s market, but just 4.9 percent of the national market. They benefit from the status quo, which bars new products, grants enormous pricing freedom to companies with a large number of “consent to rate” policyholders and guarantees by law that the industry must earn a profit.
It is entrenched interests, not consumers, who benefit from the rate bureau system.
