Insurance rates justifiably vary according to severity of losses
Re The Post and Courier’s ill-informed and typically ill-timed editorial of July 23: Your essential premise regarding insurance rates in South Carolina is too limited. You consider only one aspect of risk and ignore the other. You focus only on frequency, not on severity.
Severity is the issue which is completely ignored by this newspaper and many other critics promoting the idea that insurance rates are artificially high in this state.
Among the major factors driving up insurance rates here and elsewhere in the nation are increasingly sophisticated actuarial modeling studies from independent risk assessment experts and from the National Oceanic and Atmospheric Administration.
These are the very models which South Carolina has asked the panel to review. These models reveal increasing severity of losses due to catastrophic weather and project that weather patterns will continue to increase in severity.
One example of the accuracy of these reports is the fact that a risk assessment report released in June 2011 predicted increased storm activity with much heavier insured losses in New Jersey, New York and New England.
This report was scoffed at by various sources, until Hurricane Irene two months later. Hurricane Sandy proved that the report’s assessments were not just a fluke.
The bad news for our state is that the standard companies, such as State Farm and Allstate, are reducing their coverage here because they are overexposed and under-funded for the exposures which they have.
For their companies’ economic health and future ability to pay claims here and elsewhere, they must make the difficult choice of either reducing that exposure or increasing premiums even more than they already have. But when companies pull out, those that are left are writing at higher rates that reflect the true actuarial exposures.
There are no magic bullets. As a previous insurance commissioner lectured to our coastal agents 10 years ago, South Carolina is a very small state with very little overall insurance premium and profit for companies and thus has no leverage. If we demand that insurance companies reduce rates to write here, they will simply leave the state entirely, thus driving up the market even higher.
The South Carolina Department of Insurance has worked diligently to make our market open and competitive to allow more companies to write insurance in the state. This open market does benefit our consumers and makes insurance available throughout the state.
There are more companies writing insurance in the coastal South Carolina area now than there were in 1990.
In addition, companies are being very dynamic in applying extensive credits for wind mitigation systems which exist or are installed in homes along the coast. And, our state has tax incentive and grant programs available to help homeowners install such systems.
Companies are already working in conjunction with the Department of Insurance to find ways to mitigate rate increases which are driven by market factors beyond their control.
We cannot deny the exposures which we have on the coast: hurricanes and earthquakes are a part of our history and will, one day, be a part of our future.
Because of those exposures we are facing increased rates. But those increases are not a result of some evil profit lust of insurance companies. They are a result of vast increases of property exposures on the coast, increasing costs of disasters everywhere in this country and abroad, and decreasing profitability of writing insurance for coastal exposures.
Our market is dynamic. We have all kinds of options in writing homeowners insurance on the coast.
Contact your agent. We are here to help, to educate and to find you the best coverage we can for as fair a price as we can.
Joseph P. StringeR, CIC, CRM
Anderson Insurance Associates
Shelby Ray Court