Why North Carolina May Be The Worst Place to Drive

Let’s clear something up at the outset: this is not an NC-bashing piece. The Tar Heel State is home to beautiful sun-kissed beaches, majestic mountains, and free-flowing rivers. Some of America’s earliest colonies were settled here; and today, North Carolina is home to vibrant cities, a hearty agriculture industry, and some pretty good basketball.

But there is one reason why North Carolina may be the worst place to drive in the country: because of its auto insurance system.

A recent report revealed to the nation what Tar Heel drivers already knew: that the state’s auto insurance scheme is confusing, difficult to navigate, and disadvantageous to drivers. That’s largely due to a muddled regulatory patchwork consisting of an insurance commissioner, Rate Bureau, Reinsurance Facility, private insurers, and the courts.

But the worst part of all this is that drivers – especially good ones – generally pay more than they should for auto insurance in North Carolina. Here’s why: the Reinsurance Facility is essentially a pool of drivers that was set up by state government and is subsidized by taxes. This pool ostensibly consists of “risky” drivers who are “dumped” into it by insurers, who in turn receive government subsidies to help offset the costs incurred by the companies for writing these policies. Because this Reinsurance Facility helps insurers boost their bottom line, it’s not surprising that about 1 in 4 North Carolina drivers have been deposited into this pool (compared to the national average of 1% of drivers classified as “risky”).

And who pays for all of this eventually? All insured drivers in the state, of course. Policyholders are assessed what’s known as a “clean risk surcharge” on their premiums which averages about 6%. To make matters worse, the system has the effect of penalizing good drivers (like women and older people) while rewarding bad ones (like young males and teenagers).

So how can we make this better? The Washington-based Heartland Institute has five suggestions:


  1. Take away the Rate Bureau’s power to set insurance rates. This agency, which exists in no other state, tends to favor the interests of the insurance industry.
  2. Implement a reform plan to end profit guarantees for insurers. These companies should live or die in the open market.
  3. Phase in a process which will eventually result in the “risky” drivers who are in the Reinsurance Facility pool paying their own way – instead of placing the financial burden on all policyholders.
  4. Allow insurers to make small rate changes more quickly. Currently, this process is lengthy and cumbersome in North Carolina.
  5. Tell the state’s Insurance Department to encourage the use of more types of data to set rates. This will spur insurers to come up with more innovative products for customers.

North Carolina is a picturesque and energetic state. Shouldn’t it be easier for people to drive around in it?

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