S.C. coast insurance costs jump

Policy rates soar as homeowners are asked to accept more of hurricane risk

By JIM DuPLESSIS

jduplessis@thestate.com

S.C.’S TOP HOME INSURERS

A perfect storm of higher deductibles and surging premiums is headed for homeowners along South Carolina’s coast as insurers try to recover from losses they suffered last summer from Hurricane Katrina.

In coastal counties, insurers want owners of homes and businesses to pay more and share more of the risk of hurricane devastation.

“South Carolina is like a bullseye for hurricanes,” said Susan Merrill, spokeswoman for S.C. Farm Bureau Mutual Insurance, a Columbia-based company that is the state’s fourth-largest issuer of homeowner policies.

“The coast is a beautiful place to live, but it also carries risk, and that risk translates into higher insurance costs,” she said.

Insurers said they are scaling back their exposure in the wake of Katrina’s destruction, so they can be sure they’ll have enough money to pay claims for their remaining customers.

But the changes mean homeowners in coastal counties will spend more time trying to buy basic home insurance that covers wind damage. And when consumers find it, they’ll be paying higher premiums and shouldering bigger risks by accepting higher deductibles.

S.C. Farm Bureau Mutual expects premiums to rise 10 percent to 21 percent for homeowners in coastal counties under a rate increase that goes into effect May 15.

Allstate, the second-largest home insurer in South Carolina, expects to file a rate change proposal in the next few months that includes an increase on the coast, but will average out statewide “close to zero,” said Chris Kiah, who manages the company’s business in South Carolina from Allstate offices near Chicago.

“Any rate increase you’ll be seeing will be in the coastal areas,” Kiah said.

In counties bordering the coast, Allstate, Nationwide and State Farm have been increasing rates 10 percent to 20 percent per year for the past few years.

Some Farm Bureau customers could see decreases in Richland and Lexington counties. Statewide the average increase will be 6 percent.

Deductibles are also increasing.

Flat-rate deductibles for wind damage are becoming rare, especially in coastal counties. Instead, policies require the owner to pay a percentage of the damage.

Those policies have required a 1 percent or 2 percent deductible, but in coastal counties insurers now want deductibles of at least 2 percent, and offer deductibles of 3 percent to 10 percent to offset higher rates.

About half of Allstate’s wind damage deductibles are for 2 percent and half for 5 percent.

In Beaufort County, a $200,000 frame house built in 1985 would cost $1,600 to $2,000 per year for the premium for basic homeowner’s insurance, and require the customer to pay a deductible for the first 2 percent of wind damages, said Tom D. Aydlette, a Nationwide insurance agent in Beaufort.

On a $100,000 home, a 2 percent deductible means the owner has to pay the first $2,000 of wind damage. A 5 percent deductible would require $5,000 from the owner before insurance kicks in.

“For a guy living in a $100,000 house, $5,000 is a lot of money,”

Flood insurance is largely unaffected. The U.S.-backed program provides insurance to anyone, with rates varying by elevation, location and the home’s age. Prices for those types of insurance are rising about 1 percent or so this year, according to the U.S. Federal Emergency Management Agency (FEMA), which administers the program.