In North Carolina, consent to rate (CTR) is an agreement between the insurer and policyholder where the policyholder agrees to pay a premium greater than the established insurance premiums set by the North Carolina Rate Bureau.
The consent portion of this agreement was formerly made by the insured’s signature on a CTR form. However, Effective January 1, 2019, written consent from the insured is no longer needed. Insurance companies are required to notify insureds within the declarations page or on a standalone notification before the declarations page.
The North Carolina Rate Bureau (NCRB) is a non-profit rating bureau that sets property and casualty rates for insurance in North Carolina. The North Carolina Insurance Commissioner is responsible for setting the maximum rates for homeowner’s insurance premiums.
Imagine this rate like the Manufacturer’s Suggested Retail Price (MSRP). Manufacturers set this rate to standardize the price for a particular product and it’s up to the retailers to decide what rate best serves their business while maintaining competitiveness. Similarly, insurance companies use the rates set by the NCRB to estimate how much they should charge for each level of homeowner’s insurance, but sometimes must charge more to offer coverage.
Sticking with the analogy of MSRP, imagine the bureau premium rate as the MSRP of a product with expensive component parts. When the price of component parts rises, retailors may have to charge more than the MSRP to remain competitive, as manufacturers will charge more for the finished goods. The same applies for insurance companies. This is how the consent to rate agreement applies to you. CTR allows insurance companies to exceed the original limitations set by the NCRB for the following reasons:
According to the North Carolina Department of Insurance, 39.9% of all North Carolina homeowner’s policies written in 2020 used consent to rate. In addition, 46.2% of the total premium written in 2020 was from consent to rate. The use of CTR is not uncommon and again is determined by your level of individual risk as well as your location risk.
If you receive a consent to rate notice, there are a couple steps you can take to assure you are paying the best possible premium without risking a lapse in coverage:
Before consenting to a premium change, review these questions and prepare ahead of time. Being proactive by contacting your local agent will save you time and potentially a lot of money.