islandpacket.com - The Island Packet Online

Search Everything in the Lowcountry and the Coastal Empire.

Lawmakers should refrain from too hasty a 'solution'

Insurance costs are sending clear signal about perceived risk

Add Comment

As the hot, hot real estate market of the past two years cools here, one factor bears watching well into the future.

That is the cost of property insurance in coastal areas. Coastal areas have seen a 20 percent to 25 percent rate increase, said Allison Dean Love, executive director of the South Carolina Insurance News Service.

Insurance costs are up for a number of reasons, including increased population in coastal regions, higher property values along the coast, rising construction costs, and catastrophe models predicting more and stronger storms, according to the South Carolina Insurance News Service.

Meetings last week on insurance costs in Georgetown and Horry counties brought out more than 1,000 residents, many of them condominium owners who have seen their rates increase as much as 700 percent this past year, the Myrtle Beach Sun News reported.

Several state lawmakers at the meetings offered ideas on how to address the problem and asked the state's director of insurance, Eleanor Kitzman, to move the line designating the area that qualifies for insurance from the S.C. Wind and Hail Association, a pool of private insurance companies that share the risk in those areas.

The Wind and Hail Association was created in 1971 to provide coverage in a limited geographic area along the coast where private insurers don't provide coverage. The association is funded by premiums from customers and by the insurance companies that operate in the state. The amount companies pay into the association is determined by their overall market share. In 2005, it insured property valued at $6.7 billion in the state's coastal area.

Kitzman promised to adjust the wind line in that area but was quick to point out that moving it would only increase availability coverage, not necessarily reduce rates. The pool rate is still a market rate, she warned.

That's one reason state lawmakers should not make any hasty moves under pressure from constituents. Market forces are an efficient way to assess risk, and that's what is happening.

Lawmakers would spend their time better making sure that building codes are stringent, enforced and taken into account when insurance rates are set. Instead of looking for loopholes for individual developers to the state's beachfront management laws, they would do better to make sure we aren't building in high risk areas. Their time should go to making sure wetlands, a very efficient flood control mechanism, are adequately protected.

Sen. David Thomas, chairman of the Senate's Banking and Insurance Committee, told attendees he wanted to look into the idea of a statewide insurance cooperative to allow people to insure themselves, the Sun News reported. He wants his committee to start meeting in the next few months to come up with solutions for the next legislative session.

We urge caution.The legislature's record on hasty "solutions" for complex problems is not a good one. Everyone would be better served by stringent building codes, appropriate zoning and strong regulatory oversight to limit the potential damage from a storm.