by Jim Parker, The Post and Courier Staff
State Farm’s move to increase homeowners insurance rates on average 25 percent in Berkeley, Charleston and Dorchester counties – or $250 on a $1,000 bill – is bringing into focus the painful cost of residing near the Atlantic Ocean.
Consumers from St. George to Folly Beach, McClellanville to Moncks Corner will face the increase, effective on new policies in September and on renewals beginning in October.
“You’re kind of snookered, I think,” said Elizabeth Cochran, who lives in Mount Pleasant with her husband and their two children. “You really don’t have any other choice. You’ve got to be insured.”
The increase, approved last week by the S.C. Department of Insurance, averages 15.4 percent statewide. Some areas such as the Midlands will see increases of 3 percent to 8 percent.
The policies cover the structure and contents for homeowners and contents on renters. Mobile homes have a separate type of policy and are not affected.
State Farm, the nation’s largest property insurer, racked up record losses nationwide last year as everything from the Sept. 11 terrorist attacks to mold claims drove up payouts while investments soured in the weakening economy and volatile stock market.
The Illinois-based carrier is the market leader in South Carolina’s more than half-a-billion dollar homeowners business, with 23.5 percent of premium dollars.
Even after a rough year, State Farm is one of the few carriers_ that will insure a new house, first-time homebuyer or residents moving to the coastal counties, said Bruce White, company spokesman. “The rate increase had something to do with it, to still be able to do so,” he said.
Also, the insurer offers incentives to roll back some of the price hike. It will offer a 5 percent discount to customers who have both home and auto policies with State Farm, up from 2 percent last year. In 2001, the company instituted a 10 percent discount for homeowners who install hurricane shutters or protective glass, he said.
State Farm is not alone in seeking rate increases in the past couple of years. Allstate, which ranks second in market share, boosted its premiums 8.5 percent statewide last year and up to 23 percent on the coast. Nationwide, which places third, boosted rates 9.7 percent in South Carolina, but just 3.8 percent in the Charleston area.
State Farm is the only one of the three carriers – which combined have close to half the market -to ask for and receive a premium increase this year. Last year, the company raised rates 19 percent in Charleston, Berkeley and Dorchester counties and 6.2 percent statewide.
White acknowledged that customers might look elsewhere after seeing their bills. “But if you shop around, you will find we are very comparable,” he said. “If you have a major loss, we will be there to cover it,” he added.
The S.C. Department of Consumer Affairs had originally protested the hike as excessive. But the agency quietly dropped objections when two independent actuaries concluded that the hike was justified based on State Farm’s estimated $28 million in losses last year in South Carolina. The state Department of Insurance earlier found the rates to be necessary. The increase, first proposed March 5, is expected to generate $19 million in additional premiums.
Even while backing the increase, regulators made pointed comments about State Farm’s rates and coastal coverage in general.
“Several insurers writing homeowners’ policies have filed requests for increases due to an increase in claims activities over the past five years,” said Ann Roberson, insurance department spokeswoman.
“The department is concerned about these increases and particularly about the increasing cost of insurance along the South Carolina coast. To that end, we continue our efforts toward maintaining a favorable environment and attracting new companies to the market,” she said.
The insurance department, for instance, is sponsoring a conference in Charleston on Aug. 21-22 to study ways to make coastal coverage more affordable and available.
“Many stakeholders – the insurance department, legislators and insurers – really need to look at it in a comprehensive fashion,” said Hana Williamson, staff attorney for the consumer affairs department. Consumers need to be protected if a big storm hits the coast, she said. But Williamson questioned whether insurers were using the potential of a major hurricane as a “big scarecrow” to boost rates.
White said the rates are justified. A hurricane can bring losses of $50,000 a home, something the company can’t recoup in the life of a policy, he said.
Cochran said her family already was looking at switching to another insurer such as USAA, their auto carrier. But they learned that the carrier, which specializes in coverage for military families and relatives, was not writing new business in the Charleston area.
“With ours renewing in May, that’s going into hurricane season,” she said. “If it’s 25 percent, that’s going to hurt.”