S.C. consumer loses out on property insurance

In the property insurance game in South Carolina, insurance companies have the marbles in their pockets. Consumers have few alternatives — all of them costly and none likely to leave them winners.

As The Post and Courier’s Tony Bartelme has reported in his ongoing series, “Storm of Money,” South Carolinians’ property insurance premiums are among the highest in the country. And the agencies that are supposed to look out for consumers have been gutted beyond effectiveness.

The S.C. Department of Consumer Affairs, which in previous years saved homeowners money by challenging rate hikes, has been cut from 72 employees and a $2 million budget in 2007, to 32 employees and a budget of $620,000.

In a guest column Thursday, an industry spokesman blamed the economy for forcing those cuts. We’d say the onus falls largely on the Legislature.

In 2003, Consumer Affairs was able to fight with State Farm until its requested 29 percent increase was reduced to a still substantial 19 percent. But with only two lawyers, no support staff and almost no money for hiring experts, there is less likelihood that such a challenge would succeed today.

The S.C. Department of Insurance, which is responsible for making sure companies are solvent and set rates that are fair, also has been eviscerated.

Even if the watchdog agencies were better funded, insurance companies are now allowed by law to increase rates up to 7 percent with no public review or hearings. And insurance companies have refused to divulge the formulae, contained in their proprietary “black boxes,” on which they base their rates.

Mr. Bartelme’s series describes how lawmakers in the 1990s opted for deregulation in hopes of stepping up competition among insurance companies and bringing lower rates for customers.

It hasn’t worked, and much of the blame can be attributed to the lack of oversight.

People complain about the high cost of gas, health care and taxes. The rise in the cost of property insurance has been dramatic, too, particularly for what is supposed to be a regulated industry.

A severe hurricane can have a devastating effect on property, and insurers. But as our series points out, the risk of one hitting South Carolina is actually less than for North Carolina — where insurance rates are less.

That underscores the simple fact that consumers aren’t getting the consideration they deserve in South Carolina.

Our series already is making a difference.

The S.C. Department of Insurance has announced plans to put together a review panel, including a meteorologist knowledgeable about hurricanes, an engineer with expertise in the effects of high winds on structures and an insurance actuary who has analyzed catastrophe models. This can’t happen too soon.

The department also plans to make its website friendlier so users can get information they need about insurance. Other states have done so. There is no good reason why it hasn’t already been done here.

But until the Legislature provides the necessary resources for the Department of Insurance and the Department of Consumer Affairs — just as they have the Department of Commerce — ratepayers will continue to suffer.

The situation also deserves the attention of state watchdogs such as the Legislative Audit Council and the inspector general.

South Carolinians pay more than $1.3 billion in homeowners’ insurance premiums every year.

Cutting that expense should be a priority for state regulators, watchdog agencies and our elected officials.