Editorial: Home Insurance, Tax Increases Harm County’s Housing Options

Carteret County homeowners need to prepare for sticker shock as they assess the anticipated rising cost of insurance and taxes that will begin in March with the arrival of new property valuations and again in June as new insurance rates become effective. These increases can have a long term negative impact on the county's future without better planning.

Last week Carteret County homeowners received a warning for yet another financial hit with the announced settlement between the N.C. Department of Insurance (DOI) and the N.C. Rate Bureau, approving home insurance increases on Bogue Banks for a total of 31.9% over the next two years and 20.6% for the rest of the county.

The first financial hit, yet to be recognized, came in December when the county commissioners announced the conclusion of the recent property revaluations which indicate property values have risen exponentially (two to four times) since the last revaluation in 2020. During discussions about the new property appraisals County Commissioner Vice-Chairman Mark Mansfield stated that the values would create "sticker shock" for residents and he is not wrong.

As property values rise so too will taxes, although the tax impact can be softened by the tax rate per $100 value. But the new valuations carry with them inflationary expenses for insurance coverage as well, expenses over which homeowners have little to no control short of going without coverage, which lenders will not allow.

N.C. Insurance Commissioner Mike Causey announced last Friday that he has negotiated a two-year settlement with the N.C. Rate Bureau, the agency established by the General Assembly to represent companies licensed to sell auto and home insurance in the state. In January of 2024 the bureau proposed a consolidated rate increase for homeowner's insurance averaging 42.2% statewide for one year beginning in August. The proposed premium increases ranged from a low of 4.3% for some mountain counties to as high as 99% for the beach communities in Carteret County south to Brunswick County. Commissioner Causey disapproved the proposal calling it "excessive and unfairly discriminatory."

Under the agreement, which has been a year in the making, the DOI has approved insurance rate increases that average 7.5% statewide, but that is an average of rates spread over 40 different geographical territories within the state. For Bogue Banks the two-year increase is 31.9% (16% this year followed by 15.9% in 2026). For the rest of the county with the exception of Stella, home insurance rates are approved to go up 10.5% this year and 10.1% in 2026 for a total of 20.6% at the end of year two. The unincorporated community of Stella falls within another territory and property owners there will only see a maximum of 9.8% by 2026.

The consolidation process provided by the Rate Bureau eliminates the need for the DOI to negotiate with multiple companies. But it does create an opaque process whereby each carrier's services and incumbent expenses are melded into a complex series of analytical reports that defy understanding by the average customer. Because of that complexity provided by a wealth of insurance actuaries using a variety of models, the state relies on the expertise of DOI staff. But even they can be easily confused considering the wealth of talent from the numerous insurance companies, who for the most part control the actual source of date being used in their models to justify their arguments. In a nutshell, the state and definitely the average customer, are at the mercy of the data provided by the insurance companies.

The companies providing home insurance are facing growing challenges as more properties are being threatened by more severe natural forces. Insurance companies, either because of complacency or bad modeling, found themselves ill prepared to cover inflationary costs of home repairs and replacement in 1992 as Hurricane Andrew tore across Florida, leaving behind $15.5 billion in insured damages. The total cost of the storm is estimated at $26.5 billion. (In today's inflated dollars those totals would be $50 billion in insured losses and $80 billion in total losses).

Damages from that Category 5 storm have since been surpassed by Hurricanes Katrina in 2005, until this year the costliest storm, followed by Harvey, Maria, and Irma all in 2017, along with Ida in 2021 and Super Storm Sandy in 2011. The costs associated with this year's Hurricanes Helene and Milton as well as the fires in California will add to an already overburdened insurance pool that has continued to be caught off-guard by rapid inflationary housing costs.

Reuters news service quoted an AM Best report in June that "U.S. home insurers suffered their worst underwriting loss this century in 2023, as a toxic mix of natural disasters, inflation and population growth in at-risk areas put a vital financial market under acute pressure. Insurers providing policies were hit with a $15.2billion new underwriting loss last year…"

Those losses have precipitated rapid increases in insurance premiums to the point that property owners are now feeling the pain as well. Adding to that financial pain are increases in state and local taxes needed to build and maintain public services and infrastructure, which are another toxic mix for homeowners who are finding it hard, if not impossible, to remain in their homes.

Reporter Nicole Friedman, noted in a Dec. 23 issue of the Wall Street Journal that insurance rate increases and increased property taxes caused by "surging home values" are pricing homeowners, let alone would-be homeowners, out of the market. "These ballooning expenses are rewriting the math of homeownership," Friedman writes. "In September, 32% of the average single-family mortgage payment went to property taxes and home insurance, the highest rate ever for data going back to 2014, according to Intercontinental Exchange (a multinational financial firm)."

Not only are homeowners finding it hard to pay for insurance, in some instances, insurance companies are refusing to renew coverage or, as experienced in California and Florida, insurance companies are leaving the state completely. This concern was clearly implied in Commissioner Causey's press release which stated, "these rates (negotiated in the settlement) are sufficient to make sure that insurance companies, who have paid out large sums due to disasters and face increasing insurance costs due to national catastrophes, have adequate funds on hand to pay claims."

Jarred Chappell, the N.C. Rate Bureau's Chief Operating Officer, is not in full agreement with the commissioner's conclusion, releasing a statement that despite the bureau's acceptance of the negotiated rates, "That doesn't mean the approved rate is adequate."

Chappell's statement is a clear warning that insurance premiums will continue to rise and based on the rates for Carteret County and other coastal counties in the current agreement, the increases will be significant and possibly rapid.

Carteret County is already facing difficulties providing modestly priced housing options for its workforce. The anticipated increases in taxes and insurance only make the problem of affordable housing more critical. What is needed now is a long-term plan of development that will accommodate more affordable homes. Otherwise, the county will find its workforce living out of the county and having to commute in to work. This will be a major burden for municipal and county services from first responders to healthcare workers, not to mention retail and manufacturing operations. Solutions are needed now as the cost of living in Carteret County is rapidly spiraling upwards.

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