Bill filed to reduce home insurance rates

gsmith@islandpacket.comMarch 25, 2013 

State Sen. Tom Davis, R-Beaufort

    • To see a copy of Sen. Tom Davis' bill to reduce insurance rates, go to http://bit.ly/YABOEe.
    • Need help finding less expensive insurance rates? Call the S.C. Department of Insurance, the agency that regulates the insurance industry, at 803-737-6160.

A bill filed last week would reduce wind-insurance rates by enticing more companies to write policies in South Carolina and give homeowners more information to comparison shop when buying and renewing policies.

A Senate subcommittee in April will consider the bill, which has won the praise of Ray Farmer, the state's new insurance commissioner.

"We currently do have a problem," bill sponsor Sen. Tom Davis, R-Beaufort, said Monday. "There is a disconnect between the premiums paid and the amount of risk assumed by the insurance companies who are writing the policies."

Statewide, rates have risen 71 percent during the last decade -- even more along the coast -- and are nearly three times higher than in 1996, according to data reviewed by The (Charleston) Post and Courier.

To address it, Davis' bill would build on some insurance changes lawmakers adopted in 2007.

For instance, Farmer and future insurance commissioners would have to give residents easy-to-understand data about coastal property insurance rates and provide help finding lower rates. That would include a website, similar to one run by the state of Texas, that gives homeowners an interactive way to comparison shop among insurance companies, Davis said.

Also, insurance data, such as the average premium dollar amount and the number of claims paid, would be shared with consumers and lawmakers to increase accountability.

"With insurance, it's easy to get lost under the piles of data," Davis said. "But we have the ability through software programs to make it very user-friendly. And we can check to see if the market is getting better. If not, why not? Are there parts of the coast where the market isn't working? And why not?"

Farmer said his agency is updating its website and will provide much of the information by late May or early June, whether the bill passes or not.

The bill also would give additional tax credits to insurance companies that write at least 80 percent of their policies along the state's coast, with the aim of increasing competition and driving down prices for homeowners. The credits are expected to have a $3 million to $4 million impact on the state's general fund, meaning those dollars will be unavailable for other state needs.

Davis said he believes he can persuade lawmakers from other parts of the state to support the bill, even though its aim is to aid only those along the coast.

"Helping build a vibrant coast means a ton of tax revenue for the state," Davis said, adding that decreases in coastal rates do not mean higher rates in other parts of the state.

The bill also would provide more money for the state's hurricane-damage mitigation program. Those who own homes of $300,000 or less would get a dollar-for-dollar match for making home improvements that protect against storm damage.

Any effort to lower rates is good news to Sun City Hilton Head resident Richard McCollum, who says his annual homeowner's rate has increased from $630 to $2,465 over the past dozen years.

After shopping around recently, he was able to get a policy with a competing insurance company for slightly more than $1,200 annually that offered better coverage.

"If you don't pay attention to it, they'll rake you over the coals," McCollum said. "You have to stay vigilant in looking at it every year."

Insurance companies seem open to the proposed changes.

"The insurance market has made significant improvements since 2007, when it adopted a regulatory model that focused on free-market principles and competition," said Russ Dubisky, director of the S.C. Insurance News Service, which represents insurance companies that write policies in the state. "Any suggested improvements should aim to keep us on the path that supports competition in the industry. We believe Sen. Davis' bill would continue to support free-market principles."

The bill heads to a Senate subcommittee, on which Davis sits, that is studying the issue. From there, it must pass subcommittees and committees in the Senate and House. Should the bill make it through the legislature, it would go to Gov. Nikki Haley, who has said she favors efforts to reduce rates.

Though they support the bill, representatives of insurance companies say they're getting unfairly picked on, and false information is being spread.

Despite assertions the state has some of the nation's highest rates, some data indicate S.C. has the fourth-lowest rates along the Gulf Coast and Southeast for homes insured for less than $500,000, they say, adding the statewide annual average paid was $997 in 2010.

Insurance company officials add that insurers paid 79 cents in claims in 2011 for every premium dollar they collected. Once operating expenses are considered, the top 11 carriers, on average, paid $1.22 for every $1 earned in premiums.

They also deny that the state has a low risk of hurricane damage, pointing to Hugo in 1989, Gracie in 1959 and Hazel in 1954 as proof the risk exists. Further, they point out that 28 percent of South Carolina's total insured value is along its coast -- a percentage much higher than in neighboring states.

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