Balancing Risk and Affordability, The Shifting Landscape of Homeowner Insurance in North Carolina
Flood waters like these that resulted from Hurricane Florence in in Lumberton in 2018 are a growing driver of costs and rate hikes in the insurance industry. (Photo by Joe Raedle/Getty Images)
By Joshua Peters
Homeowner insurance in North Carolina has undergone significant changes over time, driven by natural disasters, policy negotiations, and the state's unique geographic challenges. The balancing act between affordability for homeowners and financial viability for insurers remains a central theme in the state’s insurance landscape.
Natural Disasters and Insurance Costs
North Carolina’s coastal regions, particularly vulnerable to hurricanes and other natural disasters, have historically influenced the dynamics of insurance rates. The increasing frequency and severity of storms, compounded by climate change, have driven insurers to advocate for substantial rate increases. This has placed pressure on regulators to find equitable solutions.
A recent example is the 2024 settlement negotiated by State Insurance Commissioner Mike Causey. Initially, the N.C. Rate Bureau proposed a 42.2% average rate increase, with some coastal areas facing hikes nearing 100%. However, Causey’s efforts capped increases at 15% over two years, with staggered 7.5% hikes in 2025 and 2026. Coastal regions will still see significant rises, but at a maximum of 31.9%, far below the original proposal.
Historical Context and Trends
In the mid-20th century, homeowner insurance rates in North Carolina were relatively stable, as the population was concentrated inland. However, with the growth of coastal areas like Wilmington and the Outer Banks, demand for insurance in high-risk regions surged. Major hurricanes such as Hazel (1954) highlighted the vulnerabilities of these regions, marking the beginning of escalating insurance claims and costs.
The 1980s and 1990s saw rapid coastal development, exacerbating the impact of hurricanes such as Fran (1996) and Floyd (1999). These events highlighted the challenges of insuring coastal properties, leading to higher premiums and more stringent policies. Recent hurricanes, including Florence (2018) and Helene (2024), have continued this trend, causing billions in damages. Hurricane Helene, one of the most severe storms in recent memory, resulted in over $3 billion in claims statewide, underscoring the growing financial pressures on insurers and homeowners alike.
Trends in Insurance Rates
Over the past two decades, homeowner insurance rates in North Carolina have risen steadily, with coastal regions bearing the brunt of these increases.
- 2010–2020: Average annual premiums rose by approximately 45%, with coastal counties like New Hanover and Dare seeing increases exceeding 25% in a single filing cycle.
- 2021: The N.C. Rate Bureau proposed a statewide 24.5% rate increase. Regulators approved a more modest 7.6% average increase, reflecting the ongoing tension between market demands and consumer protection.
Policy and Regulation
In 1969, North Carolina established the Beach Plan as a last-resort insurer for properties deemed too risky by private insurers. While it has provided critical coverage for high-risk areas, critics argue it incentivizes risky coastal development, raising questions about long-term sustainability.
State regulators, particularly the N.C. Department of Insurance, have played a crucial role in shaping the market. Under former Commissioner Jim Long (1985–2009), the Department adopted a pro-consumer approach, capping rate increases to protect homeowners. Current Commissioner Mike Causey (2017–present) has adopted a more balanced approach, approving gradual rate increases to reflect rising risks while maintaining affordability. Proposals for "file-and-use" legislation, which would allow insurers to implement rate changes without prior approval, highlight ongoing debates about regulatory oversight.
The intersection of politics and business significantly shapes North Carolina’s homeowner insurance market. Political leaders, particularly insurance commissioners, have wielded substantial authority in regulating rates, often responding to consumer advocacy groups opposing steep hikes. Meanwhile, the N.C. Rate Bureau continues to push for higher premiums, citing escalating disaster risks and rising construction costs. Environmentalists and inland homeowners, however, have raised concerns about policies that disproportionately burden them with the costs of insuring high-risk coastal properties. These debates have fueled broader discussions on climate adaptation, risk-sharing, and common-sense policy solutions.
Looking Ahead
Hurricane Helene and other recent disasters have underscored the challenges facing North Carolina’s homeowner insurance market. The state must navigate the complex interplay between economic growth, environmental realities, and political leadership. Balancing development with sustainability, adapting to climate change, and crafting rational policies are critical priorities.
While measures like the Beach Plan have provided short-term solutions, they have also sparked debates about incentivizing risky development. Moving forward, North Carolina must address escalating risks with innovative, forward-looking policies to ensure resilience and sustainability in its homeowner insurance market.