North Carolina: Consent to Rate

Written By
Luke P
Posted
July 29, 2021

What is Consent to Rate?

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.  

Who Sets the Maximum Rates for North Carolina?

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:

  1. Your insurance company determines you are individually a greater risk: You may have several insurance claims that are undesirable for the insurer or live in an older building that is more vulnerable to structural issues than newer homes. To offer you coverage, an insurer may have to charge more than the bureau premium.
  1. Your insurance company identifies the area you live in as having greater risk: You may live in an area vulnerable to natural disasters, hurricanes, or have a high rate of crime and vandalism. The insurance company offsets the higher probability of losses in an area by charging higher premiums.

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:

  1. Are there coverages that you can reduce or remove from your policy? Review your current policy in relation to your level of risk.  
  1. Is your current insurance company the best option for you? Contact your insurance agent for advice on whether you should shop for a new insurance provider.

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.  

About the Author
Luke P
Licensed insurance agent, running enthusiast, rocks a killer mullet.
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