Comments made at a recent hearing by the former director of the state Department of Insurance, Scott Richardson of Hilton Head Island, underlie the conventional wisdom that prevails in the regulation of insurance matters in South Carolina. He states that if regulation is imposed on insurance companies, they will leave the state.
Insurers in South Carolina have experienced a return of net worth in excess of 20 percent for the last 10 years (the highest of any state). This return is nearly four times the national average of 5.9 percent. Property insurance coverage has also been hollowed out, removing the risk of flood and wind and hail from its coverage.
National insurers have now accumulated nearly $600 billion in claim reserves over a 43-year period. This exceeds the losses from the top 10 catastrophic storms in the past 25 years by a ratio of nearly 400 percent.
Current legislation permits rates to be raised 7 percent per year. Most insurance companies submitted rate increase requests in excess of that level, and then "settle" for a rate increase of ... guess what, 7 percent. This fixed minimum standard guarantees virtually an automatic increase each year.
South Carolina has lower risk (anyone remember the last major hurricane?) with higher premiums, resulting in higher profit margins.
Our state government must become balanced in protecting S.C. homeowners, and not just the insurance companies who are unfairly (but skillfully) profiting from our pain.
Editor's Note: Riedel is a board member of the S.C. Competitive Alliance, which lobbies for change in rate-setting policy.