RALEIGH -- Insurance companies are looking to raise a cap on car insurance costs and the North Carolina Department of Insurance argues that rates should drop. Both sides met for a hearing Monday to decide who is right.

"We think the rates need to go up some," said North Carolina Rate Bureau general manager Ray Evans. "The commissioner thinks otherwise so we're here to resolve that difference of opinion if you will."

North Carolina sets a cap that insurance companies can charge for car insurance. The Department Of Insurance commissioner hasn't approved an increase since 1995. The North Carolina Rate Bureau, which represents the insurance industry, wants to raise that cap 13 percent.

"The Department of Insurance does not think that's necessary," Chrissy Pearson, from the North Carolina Department of Insurance said. "In fact, we think it's probably another year that we can see a decrease in rates."

Insurance companies argue an increase would not affect all customers and in fact would focus mainly on bad drivers, but state officials argue it opens the door to hike rates for both good and bad drivers.

While the tough economy is having its effect on drivers, the insurance companies say it's impacting them as well.

"We see inflation and costs rising, particularly in medical costs and to repair cars seems to be going up pretty rapidly," Evans said.

The Department of Insurance argues the insurance industry is using bad numbers to plead their case.

"Basically, we think the insurance companies have put out some weird math here," Pearson said. "It's skewed the numbers and it's made it look like a worse picture than it is."

The hearing will take anywhere from four to six weeks. Once rates are approved, they will stay in place until 2010. If the issue goes to court, insurance companies can raise rates. However, if it loses, the money must be refunded to customers.