Car insurance remains costly

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Lawmakers acted in good faith in 1998 when they applied free market principles to this historically regulated industry. The expectation was cost competitiveness. But premiums in this state are climbing — and will likely continue to climb — for mainly one reason: this state's comparatively high rate of uninsured motorists.

A study by the National Association of Insurance Commissioners, as reported in The (Charleston) Post and Courier, shows car insurance rates in South Carolina climbing by 10.4 percent in 2002. That's higher than the national average of 7.8 percent and more than twice the rate of increase in both Georgia, which saw premiums grow by 5.1 percent, and North Carolina, which saw a 4.1 percent increase.

Clearly, the uninsured motorist problem is affecting rates. An estimated 25 percent of drivers in this state take to the road without insurance. By comparison, the uninsured motorist rate in Georgia is less than 10 percent, and in North Carolina it's less than 5 percent.

Consequently, the cost of uninsured motorist coverage included in premiums is priced significantly higher in South Carolina, reflecting the heightened financial risk insurance companies assume doing business here.

This state is taking steps necessary to lower the rate of uninsured drivers, the most significant being better reporting of dropped coverage followed by aggressive enforcement. The S.C. Department of Public Safety has employed 35 retired state troopers whose job is to go to the homes of the uninsured to confiscate license plates. Reliable, comprehensive reporting and tough enforcement are proven keys to driving down the rate of uninsured motorists.

But cost is also an issue in this poor state. Therefore, a low-cost policy available to the poorest drivers might also help with the uninsured motorist problem. New Jersey has an innovative state-sponsored program that uses the Medicaid eligibility standard to enroll drivers in a low-cost, minimum-coverage insurance product. South Carolina, with its high poverty rate and absence of public transportation, would benefit from such a program.

Then there is the problem of a massive amount of litigation that cost insurers billions of dollars annually. More mediation, which the state court system is working toward, will help cut some of that cost. But tort reform is also urgently needed to help keep frivolous suits out of the court system.

Some of the rate increases were expected with deregulation. High-risk drivers who were subsidized under regulation now pay premiums that reflect their elevated risk. But clearly, rates are rising because of our inability to get a handle on uninsured motorists. Until that appalling number is lowered, premiums will continue to soar.