A Refund? Glad You Asked

 

Friday, Jul 17,2009, 10:46:30 AM   Click:

Here are answers to common questions about car insurance deal announced Wednesday:

Q. How much will I save with the lowest fare? Auto insurers have requested an increase of 9.4 percent last year, then sought a further increase of 1.4 percent earlier this year. Instead, the rate of decline of half a percent. The savings between the new rates and requested that the insurers differ by region, customer and the insurer.

Tariffs regulated by the state are the maximum rates insurers can charge cars. Competition is driving insurers to offer discounts to many pilots.

Q. When do the new rates take effect? Nov. 1, but they are retroactive to Jan. 1.

Q. Who is eligible for a refund? The Insurance Department estimates that 1million of the 3.8million policyholders in the state were charged higher rates that entitle them to refunds, plus interest. A single policy can cover multiple drivers.

Q. Why won't all policyholders receive a refund? Insurers were allowed to charge drivers up to 9.4 percent in higher premiums as of January while they appealed the much lower auto rates ordered last September by the former insurance commissioner, the late Jim Long. Long, 68, died Feb. 2 from the effects of a stroke suffered shortly after he left office. But, given competitive pressures and knowing that refunds would be required if the insurers lost their appeal, some companies chose not to raise rates. Only consumers who paid higher premiums are owed refunds.

Q. When will refund checks be issued? The first checks should be mailed in mid-2010.

Q. How can I find out whether I'm owed a refund? Consumers should contact their insurance company. But the settlement was just signed, and it could be a few months before companies determine who is due a refund -- and how much they are owed.

Q. What's the history behind the rate dispute? Last year insurers requested a 12.9 percent increase, which they argued was justified by the rising cost of medical care and car repairs and a slower decline in the rate of accidents.

But Long concluded the increase wasn't justified by the data insurers submitted; he ordered a 16 percent decrease. The insurers appealed to the N.C. Court of Appeals.

Q. Why didn't Commissioner Wayne Goodwin stick with the 16 percent decrease? Goodwin pointed out that the settlement encompasses additional consumer-protection measures: eliminating the 1.4 percent increase sought by insurers this year and preventing any rate hikes from going into effect before Oct. 1, 2011.

"Given the current economy North Carolinians face, every dollar counts and every dollar is needed as soon as possible," Goodwin said. "If we didn't reach a settlement, this could have dragged on for several more years [in the courts]. I just thought it was best to try and work out the best settlement for consumers now rather than later."

Q. Why did insurers agree to a decrease? Insurers are convinced that the rate they agreed to is inadequate but chose to settle for several reasons, said Ray Evans, general manager of the Rate Bureau.

For one thing, rates for 2008 and this year were in limbo as long as the dispute with regulators was unresolved. "In the final analysis, getting rid of the uncertainty is worth a great deal," he said.

In addition, while the rates were in dispute, insurers were required to put into escrow premiums collected above the rate ordered by Long -- collectively, about $1 billion a year. If the insurers lost their appeal, they would have had to refund the excess premiums collected, plus interest, to policyholders.