In N.C., chairman’s auto insurance bills don’t even meet his own standards
A pair of bills sponsored by Senate Insurance Committee Chairman Tom Apodaca, R-Henderson, that look to address the North Carolina system were approved by the full Senate back on April 18. S. 180, which cleared the chamber unanimously, proposes to make it easier for insurers to offer some “optional program enhancements,” which could include data-gathering telematics or accident forgiveness features. S. 181, which passed 43-1, provides standards for younger drivers’ age as a rating factor.
Both bills have been referred to the House Committee on Commerce and Job Development, and if they pass there, they’ll move on to the House Insurance Committee. And without question, both bills would mark an improvement of North Carolina’s current system, in which the state’s auto insurers collude to set the terms of rates of a one-size-fits-all product through a state-mandated cartel known as the North Carolina Rate Bureau, and in which roughly one-fifth of all drivers can’t get coverage from a private insurer (representing more than 80 percent of the residual market drivers nationwide.)
But when it comes to auto insurance reform, the General Assembly was tasked with some specific goals this year, which one can find in the final report of the Legislative Research Commission’s Committee on Automobile Insurance Modernization, which was co-chaired by Sen. Apodaca himself. The report represents the consensus reached only after the panel heard from representatives of the Department of Insurance, the Rate Bureau, the state-sponsored North Carolina Reinsurance Facility, consumer groups, free-market groups, agents, and insurers who were both for and against changes to the system.
Delivered in May 2012, the panel’s final report specifically called on North Carolina lawmakers “enact legislation providing for a smooth and measured transition from the current system for automobile insurance rate regulation to a system more reliant on free market principles that reduces the population of the facility, eliminates the need for the hidden recoupment surcharge, encourages competition, and also allows for more innovative products and benefits for the consumer.”
So, let’s see how well the Apodaca bills fulfill that mandate. A system more reliant on free market principles? Swing and a miss. One that reduces the population of the facility? Eliminates the recoupment surcharge? Encourages competition? Nope, nope, and nope.
One could give the Apodaca bills partial credit for allowing “more innovative products,” but that’s really being generous, because it remains to be seen whether in practice the rules actually permit innovation, or simply allow insurers to import a facsimile of some of the products and discounts they already offer elsewhere. At best, it appears he’s gone one for five. In baseball, that sort of batting average (.200) is known as the “Mendoza line,” and it’s sure not considered a good one.
All in all, it’s hard to avoid the conclusion: While there is still a chance for the House to fulfill the modernization committee’s mandate and enact true reform to the system, the bills that have been sent to them from Sen. Apodaca fall far short of the legislative goals he himself helped lay out.