Lehrer testifies on North Carolina's auto insurance market
North Carolina is currently considering multiple changes to both its auto insurance regulatory system and how auto insurance rates are changed. While North Carolina’s insurance rates are comparable to neighboring states in the Southeast, rates for good drivers are still higher then they need to be as a result of the current regulatory system.
Critics of the current system argue that it is unfair to safe drivers and in desperate need of reform. The financial risk of more-dangerous drivers is passed on to low-risk drivers, hiking up insurance costs for many policyholders. In addition, supporters of reform cite the need to phase out North Carolina’s government-mandated, privately run insurance pool for risky drivers, which is many times the size of the national average while also charging a “hidden tax” of around 6 percent to every insured driver.
Reform of the auto insurance system has been slow because some in-state private insurance companies support the status quo. The state-run pool for risky drivers allows the private insurers to shed these more-costly policies, while policyholders are unaware if they are in the pool because they continue to receive bills from their private insurance company.
On January 25, Eli Lehrer, vice president at The Heartland Institute and director of its Center on Finance, Insurance and Real Estate testified before the Joint Study Committee on Auto Insurance Modernization on North Carolina’s automobile insurance system, offering several suggestions on how the state’s insurance system may be reformed. Lehrer’s written testimony is reprinted below.
January 25, 2012
Mr. Chairman, Senator Apodaca, and Members of the Committee:
Thank you for inviting me to speak today. My name is Eli Lehrer, I’m Vice President of the Heartland Institute, a national free-market think tank. At Heartland, I run our Center on Finance, Insurance, and Real Estate, the largest of Heartland’s six policy centers. In work I have done with the Raleigh-based John Locke Foundation, I have written extensively on North Carolina’s automobile insurance system.
South Carolina Auto Insurance Companies - News
According to insure.com, which researches the actual quotes extended to insurance consumers rather than revenue to insurance companies, 2010 rates for North Carolina averaged $1154 while South Carolina rates averaged $1095.
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