North Carolina drivers are required by the Motor Vehicle Safety and Financial Responsibility Act to carry auto insurance. If you are a high risk driver, you will be able to find coverage through auto insurers in the state, but the insurance company you choose may turn your policy over to the North Carolina Reinsurance Facility (NCRF). According to the NCRF, rates for high risk drivers through the Facility are often 35% higher than what they would be through the voluntary market. When your policy is with the NCRF, you’ll want to focus on improving your driving record. This will make you eligible for the voluntary market and for lower insurance rates in North Carolina.
What is the North Carolina Reinsurance Facility (NCRF)?
The NCRF was created in 1973 “to ensure that all eligible risks can purchase auto liability insurance.” According to NCRF, it covers about 25% of the drivers in the state, making it one of the largest residual market mechanism for automobile insurance in the United States. The Facility’s goal is to distribute the losses proportionally across all member insurers in order to help offset the high risk policies insurers take on. All companies eligible to write auto insurance in North Carolina are part of the NCRF, and must not turn down any eligible high risk drivers. The only reasons a NC auto insurer may refuse to insure a driver or cancel a high-risk policy is if the driver is either not registered with valid license in NC, or if he/she has failed to pay policy premiums on time.
There are over 450 car insurance companies that are members of the NCRF. The NCRF allows insurance companies to pass (or “cede”) any number of policies, including those covering high risk drivers, to the organization. By passing these higher risk policies to the NCRF, the auto carriers give up the premiums gained through those policies; in return, the risk is distributed to other member companies through the NCRF. Members share the losses and expenses of policies ceded over to the NCRF in proportion to the amount of auto insurance they write in the state. Insurance companies just file a “cession notice” with NCRF, and your policy transfers over within 30 days, with no further work on your end.
In 1979, the state established a “clean risk” category for the NCRF. By definition, you are considered "clean risk" if you have at least 2 years of driving experience, with neither traffic violations nor at-fault accidents on your record. This category allows member companies to cede over standard (non high-risk) policies to the NCRF, while still charging voluntary market rates to these good drivers. The change was meant to allow the NCRF itself to become more financially self-sustaining, as the high risk losses are balanced by the low risk policy premiums. Overall, the NCRF is supposed to operate at neither a profit nor a loss. However, the Facility continues to operate at a loss. In response, the state passed legislature allowing insurers to charge "clean risk" drivers a recoupment surcharge, which appears under "NC Recoupment Fee" on the policy.
North Carolina Reinsurance Facility Coverage Limits
Because you are technically still covered by your auto insurance company, whether or not your policy is ceded over to the Facility, the coverage options are mostly the same. You are also still bound by the NC Financial Responsibility requirements. Here is a table illustrating the types of coverage and their respective limits acceptable to the NCRF:
|NCRF Minimum Limits||NCRF Maximum Limits||Exception - Umbrella Policy|
Bodily Injury (BI)
|$30,000 per person/$60,000 per accident||$100,000 per person /$300,000 per accident||$250,000 per person /$500,000 per accident|
Property Damage (PD)
|$25,000 each accident||$50,000 each accident||$100,000 per accident|
|$30,000 per person/$60,000 per accident||$1,000,000 each person and $1,000,000 each accident||N/A|
|$25,000 per accident||$50,000 per accident||N/A|
However, NCRF limits the coverage type as well as the range of the liability insurance coverage amounts eligible to be ceded over, which in turn may limit your choice of coverage. The only exception to the maximum limits is if you are required to maintain higher liability coverage limits because you have an “excess liability” or a personal “umbrella” insurance policy. In such case, the NCRF accepts Bodily Injury coverage up to $250,000 each person and a total of $500,000 per accident.
Coverage for Collision and Comprehensive are typically not accepted by the NCRF. However, depending on your insurer, it may still allow you to purchase the coverages at its own risk. Otherwise, if you want these coverages, you must find a company in North Carolina that writes “non-standard” insurance. That company may ask you to sign a “consent to rate” form, explicitly agreeing to pay rates higher than what is filed with the NC Department of Insurance.
NCRF Policy Premiums
In North Carolina, auto insurance premiums are set based on many factors including your driving record, where you live, the make and model of your vehicle, how you use your vehicle, and your age. Although policies ceded to the NCRF are roughly 35% higher than they otherwise would have been, premiums are still calculated using the same factors.
North Carolina allows insurers to assess the NC Recoupment Fee on all auto insurance policies every year, although there should be an exception for drivers with at least 2 years of clean driving record. The amount of surcharge is based on the recoupment percentage established for the current period. The latest recoupment fee for 2015 is 4.06%, and it is applied on your liability coverage premiums. The recoupment fee is not considered part of your premium.
Getting Auto Insurance in North Carolina as a High Risk Driver
Drivers can contact any licensed auto insurance company or agent in North Carolina to inquire about high risk insurance. They’ll tell you the available coverage options, premiums, and payment plans based on the insurers you are considering. Your insurance company is required to notify you that your policy has been ceded over to the NCRF only if your premium is higher (than what it otherwise would have been in the voluntary market) as a result. Since insurers have the liberty to decide which policies to cede over and which not to, you should shop around for several insurance companies before making a decision, especially if you found out that one insurer is ready to hand your policy over for higher premiums.
North Carolina’s Department of Insurance also cautions that it’s wise to pay your premium on or before the due date to avoid the risk of cancellation. There is no grace period for automobile insurance. If you miss the due date, your insurance company notifies the NC Department of Motor Vehicles, which sends you a liability insurance termination notice.
You can learn more about North Carolina’s Reinsurance Facility at their website here: http://www.ncrb.org/ncrf/Home/tabid/245/Default.aspx. For more information about insurance for high risk drivers, call the North Carolina Department of Insurance at 1-855-408-1212.