DOI plan to raise fees likely to face industry opposition

The state Department of Insurance's proposal to raise fees it collects from insurers and other businesses it regulates won't win many fans among companies or consumers.

In response to Gov. Bev Perdue's recent request for suggested budget cuts, agency officials instead recommended increasing various fees that it collects from insurers, agents, adjusters and others licensed to do business in North Carolina. Other state agencies also have resisted proposing cuts (Read the full N&O report here).

But insurers would oppose any effort to raise their costs. If the DOI wants to raise fees that are passed along to consumers, it would need to fully disclose that intention, said Jennifer Cohen, executive director of the Insurance Federation of North Carolina.

Such a move could provoke a backlash among consumers, a prospect that will scare lawmakers.

"We wouldn't want consumers to think insurance companies were simply jacking up their rates to make more profit," Cohen said. "People are struggling with job issues and debt issues. Consumers will be very much opposed to letting the state balance the budget on their backs."

The DOI's $38 million annual budget isn't traditionally funded by state appropriations, but is supported by the fees it already collects from businesses.

North Carolina's insurers pay lower fees than in other states, so raising them slightly won't be a major hit, said spokeswoman Kristin Milam. The additional fees would raise $1.9 million to $5.7 million, depending on the size of the increase.

"We don't want to get special treatment but our budget is set up differently," Milam said.

"We need to maintain our operating budget in times of economic crisis," she added. "That's when you see crime start to rise and businesses start to fail. We need to make sure we are able to continue auditing commpanies, investigating insurance fraud."

Perdue gave agencies the option of suggesting ways to boost revenue 5 percent, 10 percent or 15 percent, rather than recommending cuts of those size, Milam said.

"We don't want to be the ones raising fees, but this hand has been forced," she said.

The problem is that nearly every year, state agencies that depend on industry fees look at ways to raise more money to offset increasingly tighter budgets, the Insurance Federation's Cohen said.

"Sometimes those are successful and sometimes they're not," she added. "We would certainly oppose higher expenses borne solely by the companies."

Most of the DOI's budget goes toward the salaries of its staff of about 420 people. Some of those positions are funded by federal grants, including several new ones added recently with money tied to the federal health overhaul.

Any forced budget cuts would likely mean eliminating some positions, Milam said.