Sen. Wesley Meredith of Fayetteville has filed a bill that he says would increase competition by auto insurance companies and save consumers money.
But some insurers, as well as the state's insurance commissioner, say Meredith's legislation would mean higher premiums, including in Fayetteville where drivers already pay the state's highest rates.
Meredith's bill has split the insurance industry. Backing the legislation is a statewide coalition called FAIR, or Fair Automobile Insurance Rates for North Carolina, that includes companies such as State Farm, Geico, USAA, Allstate and Farmers.
On the other side are companies including Nationwide, N.C. Farm Bureau, GMAC and Discovery Insurance, all of whom oppose Meredith's plan to dramatically alter how auto rates are regulated in the state.
State Insurance Commissioner Wayne Goodwin has blasted the bill. He said the state already has the lowest auto insurance rates in the South and the seventh-lowest in the country.
Goodwin, a Democrat, said Senate Bill 154 would lead to higher rates even for drivers with good records. The bill would allow insurers to increase rates every year without oversight from his office, so long as the aggregated annual increase was less than 12 percent among their policyholders.
"Presently, if there is any across-the-board rate request, the Department of Insurance has to review it, to make sure it doesn't violate standard rules and to prevent excessive rates and to protect consumers from unfair discrimination," Goodwin said.
More than 160 companies underwrite auto insurance in North Carolina, and they are represented by the N.C. Rate Bureau. Typically, the bureau proposes rate increases on behalf of the industry, then after a period of negotiations a final settlement is reached with the insurance commissioner. Often the increase, if any, is less than what the industry initially requested.
In 2008, insurance companies asked for a 12.9 percent increase. Former Insurance Commissioner Jim Long rejected their proposal. The industry appealed and ultimately got a 9.4 percent increase.
In 2009, Goodwin announced a settlement with insurance companies that resulted in about $50 million in refunds and rate reductions for about 1 million drivers in the state.
Fayetteville drivers pay some of the highest insurance rates in the state. They pay $448 a year for minimum liability coverage for bodily injury and property damage. The statewide average is $370.
One reason for the high premiums, police and the insurance industry say, is Fayetteville has a lot of car crashes. A recent survey by the N.C. Department of Transportation ranked Fayetteville second-worst, behind Asheville, for crashes based on a variety of factors.
Meredith said his bill would make it easier for companies to offer discount programs to good drivers and allow them to raise rates on risker drivers.
"It's the consumer that is going to win," Meredith said.
Meredith's bill was filed Feb. 28, and a similar bill was introduced in the House on March 7.
Under the current system, about three-fourths of policyholders in North Carolina pay a subsidy on their premiums to cover the liability for high-risk drivers in the state.
The so-called "hidden tax" amounts to 4.3 percent of annual liability premiums, or roughly $15 to $17 for the average auto policy, the News Observer of Raleigh reported this month.
The John Locke Foundation, a conservative policy group in Raleigh, said in 2011 the auto insurance system "penalizes the state's best drivers and guarantees profits for the private insurance companies. It hurts women and older drivers and hampers innovation."
Meredith, a landscaping general contractor and former Fayetteville city councilman, is one of two co-chairman of the Senate's Insurance Committee. His campaign received $13,500 last year from the auto insurance industry, public campaign reports show. Donors included the N.C. Small Business PAC of the Independent Insurance Agents of North Carolina, the N.C. Association of Insurance and Financial Advisors and N.C. State Farm Agents and Associates.
Meredith said the special interest money did not influence his bill.
"They are all interested in the bill, because it would affect their industry," he said.
The amount he received last year includes $4,000 from Nationwide, which opposes his bill. The company is the No. 1 carrier for auto insurance in the state, writing 18.1 percent of the market, according to state officials.
Elizabeth Stelzer, a spokeswoman for Nationwide, said Senate Bill 154 would lead to higher rates, less independent oversight, more uninsured drivers and more volatility in the insurance market.
Meredith's bill has some competition from the other co-chairman of the Insurance Committee. Sen. Tom Apodaca, a Republican from Hendersonville, has introduced Senate bills 180 and 181 that seek a more targeted approach to reforming auto rates.
One would allow insurers to consider drivers under the age of 19 as a factor in setting rates. The other would allow companies to offer optional program enhancements approved by the insurance commissioner.
Apodaca's bills may have an easier time in the Republican-controlled Senate. He has more seniority than Meredith, and Apodaca is chairman of the Senate Rules Committee, which decides which bills move forward.
Opponents to Meredith's bill are backing Apodaca's proposals.
"Let's reform what's broken and what needs fixing," Goodwin said, "without damaging the entire system."
Apodaca could not be reached for comment for this story.
All three bills have been referred to the Insurance Committee.
Wesley said he hopes to sit down with Apodaca to talk about his bill.
"These bills are both related to the same subject matter," he said.Staff writer Andrew Barksdale can be reached at email@example.com or 486-3565.