North Carolina is the only state in the nation that forces insurance companies to collectively develop car insurance rates through a Rate Bureau. It’s a flawed system that stifles competition, limits consumer choice, and forces good drivers to pay more than they should, so risky drivers can pay less.
Problems with the Rate Bureau Approach
- Government Price Controls: North Carolina mandates how insurance companies set their rates and limits the ability for insurance companies to compete on price. The government price controls force good drivers to pay more, while risky drivers pay less.
- Discounts Not Available in North Carolina: Drivers are not able to take advantage of innovative programs and good driver discounts offered by major insurance companies. Consumer choice is limited.
- Hidden Taxes: Every driver in North Carolina must pay a hidden tax to subsidize the cost of insuring risky drivers.
Every other state in the nation has a competitive, free market system that forces car insurance companies to aggressively compete for your business. By giving companies the ability to opt out of the Rate Bureau, you can enjoy the advantages of a competitive, free market system:
Advantages of a Competitive, Free Market System
- Fair Prices: With less government control of prices, insurance companies have more flexibility to set fair rates for individual drivers. Fair rates means good drivers pay less, and are no longer forced to subsidize the cost of insuring risky drivers.
- More Discounts: A free market system lets North Carolina drivers shop for lower rates and take advantage of a host of innovative products and incentive programs that are not currently available.
- No More Hidden Tax: The hidden tax that cost North Carolina drivers nearly $900 million over five years will be eliminated.
- Consumer Protections Still Exist: Companies who choose to opt out of the Rate Bureau will still be required to submit rate requests to the Insurance Commissioner for review. The Insurance Commissioner will maintain the authority to disapprove any rate increases considered excessive.
Eli Lehrer on the Flaws with North Carolina’s Approach to Car Insurance
Lehrer is president of R Street Institute, an independent think tank based in Washington, DC.