Unlike agencies in other states, South Carolina’s Department of Insurance doesn’t offer the public simple ways to help consumers find deals or learn about rate increases.
South Carolina lawmakers enacted laws that enable insurance companies to increase rates without prior approval or public hearings as long as rate hikes are lower than 7 percent.
Meanwhile, they eviscerated budgets of two government agencies charged with monitoring rates.
Insurance companies are using controversial computer models to calculate rates, but South Carolina has yet to examine these models in depth.
Homes, like people, have their quirks. In calculating a premium, an insurer may ask about a building’s wiring, roof type and/or age. The company may hire an inspector to look at the water heater and take pictures of the paint job.
Many also calculate rates using credit scores and education levels of customers, a move insurers say identifies people likely to make more claims. Critics say these practices unfairly affect the poor.
All these variables are buried in rate filings sent to the S.C. Department of Insurance and other states, which can be good news for consumers.
Using this information, for instance, Texas crafted a website where consumers quickly plug in information about their homes and lives. In seconds, they get a list of companies, rates and contact information, along with a roster of potential discounts for alarms, sprinklers and other options that can help consumers shop for better rates.
The Insurance Department has a brochure on its website, along with a spreadsheet that lists sample rates from just 20 companies.
The agency spreadsheet also is limited to rates for a recently built house; rates for older homes can be much higher.
The Insurance Department also fails to let consumers know about looming rate hikes in any useful way, even though insurers send them notices about rate hikes months in advance.
Information about rate-hike proposals is on its website, but it’s difficult to find. The department is working on ways to make these rate changes more visible and user-friendly and hopes to roll it out this fall.
In the meantime, homeowners are more likely to learn about rate hikes in a letter, such as the one recently sent by Allstate to a Mount Pleasanthomeowner.
Elected leaders and the courts long have recognized the importance of insurance and the vulnerability of consumers. People who have suffered losses are especially sensitive to insurers that hold up claims or try to pay less than what customers truly lost, and communities hit by disasters depend on insurance to get their economies rolling again.
A century ago, insurance companies argued that they should be free from government regulation, but the U.S. Supreme Court settled the debate in 1914.
In South Carolina, the Insurance Department is responsible for making sure companies are solvent and set rates that are fair to insurers and property owners alike.
Experts say South Carolina’s approach shifted in the late 1990s. As insurance companies pulled out of coastal areas in droves, a succession of commissioners — all former insurance company executives — worked hard to reduce regulations.
They argued that a free-market stance would draw more companies to the state and increase competition, an approach that had some success in the auto insurance business.
The situation came to a head in 2007 as insurance companies threatened to pull out of even more areas along the coast. Fearing that homeowners might not be able to get coverage at all, the General Assembly in 2007 expanded the “wind pool,” zones near the ocean where homeowners were guaranteed limited and expensive wind hazard coverage with the S.C. Wind & Hail Association.
Lawmakers also allowed insurance companies to increase their rates without first seeking state approval as long as those increases averaged less than 7 percent.
Since then, insurance companies have pocketed hundreds of millions of dollars. In 2007, private insurers collected about $987 million in premiums from property owners. By 2010, it was more than $1.2 billion.
A handful of insurance companies have entered the market — today, the state has more than 120 companies writing home insurance policies, up from 108 in 2006.
The industry, however, continues to be dominated by a few insurance company groups. Eleven corporations, including State Farm and Allstate, control more than 70 percent of the state’s home insurance market.
Meanwhile, the two agencies that monitor these corporate juggernauts have seen their budgets and staffs whacked.
Last year, the Insurance Department handled the credentials of more than 170,000 licensed agents, adjusters and other insurance professionals, fielded more than 60,000 telephone and written complaints, and processed more than 10,400 rate filings. To do all this, the agency has about 80 employees, down from 145 five years ago.
Lawmakers not only cut the Insurance Department but also de-fanged the Department of Consumer Affairs, which had saved homeowners buckets of cash by challenging rate hikes.
In 2003, for instance, State Farm sought a 29 percent statewide increase. The Consumer Affairs Department fought the increase until State Farm agreed to a 19 percent hike.
But, like the Insurance Department, Consumer Affairs is a shell of its former self, with just 32 employees, down from 72 in 2007. It received about$620,000 from the state’s general fund last year, down from about $2 million in 2007.
The agency has only two lawyers to study insurance cases and no support staff, and almost no money for hiring experts with insurance expertise.
South Carolina insurance industry officials argue that the insurance climate here is much healthier than other states.
Homeowners may not feel the same way.