As state lawmakers debate potential reform of North Carolina’s auto insurance system, a new John Locke Foundation Spotlight report highlights some key facts about flaws in the current system.

RALEIGH — North Carolina’s auto insurance system imposes a special tax on all drivers that helps subsidize rates for high-risk drivers. That tax is part of a system designed to guarantee profits for insurers. Those are just two of the key facts highlighted in a new John Locke Foundation Spotlight report.

Highlighting seven facts about the current auto insurance system, the report arrives as the General Assembly considers potential reforms. Bills in both the House and Senate call for changes.

“North Carolina’s automobile insurance system guarantees profits to insurers,” making it “literally impossible for insurers to lose money,” write report co-authors Alan Smith and R.J. Lehmann, co-founders and senior fellows at the R Street Institute, a Washington, D.C.-based free-market public policy think tank.

All insurers in the state use the same fundamental rate plan, Smith and Lehmann write. “There’s far less opportunity for insurers to try new ways of managing risks,” they write. “The overall results are pretty good for the insurance business (which is why some insurers, including the state’s largest, defend the current system) but bad for consumers.”

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