Some top workers' compensation insurance companies
are scaling back business in South Carolina, saying the cost of underwriting
policies has gotten too expensive in light of uncertainty over a proposed rate
increase and the pending imposition of higher business charges.
Two carriers, American Interstate Insurance Co. and Builders Insurance Group,
have circulated memos to their independent agents notifying them of the changes.
A third company, Accident Fund Insurance Co., hasn't altered its position but
says it's "very concerned" about its ability to make a profit here.
Tom Maupin, a spokesman for Builders Insurance Group (not to be confused with
Builders Mutual Insurance Co.) said his Georgia-based carrier will no longer
write standalone workers' comp policies in South Carolina. It will, however,
continue to sell such coverage alongside its general liability policies.
The company, which entered the South Carolina market last year, writes
roughly $2.5 million in workers' comp premiums, putting them among the top 50
insurers in the state.
"We have not seen good loss experience in South Carolina, albeit our tenure
there is pretty short. And, obviously, developments like this impact our ability
to make profit writing workers' comp," Maupin said. "We understand this is only
half the story, that the outcome of a rate increase is pending. But we need to
change our strategy before the pending outcome."
The moves come amid a lingering fight over a workers' comp rate request that
began in July when an industry-led group proposed an unprecedented 32.9 percent
rate increase, likely the highest nationwide.
Insurers say the higher rate is needed because they are losing a lot of
money. For every $1 paid to insurers in workers' comp premiums in South Carolina
in 2003, insurers paid out $1.27 in losses and expenses. Nationwide, that figure
was $1.02.A mix of consumer and business groups challenged the rate proposal,
contending it would cost policyholders at least an extra $130 million in
premiums and would discourage business expansion.
The issue is now before an administrative law court. But the Department of
Insurance rejected the rate request without waiting for a ruling from the judge,
who will decide soon whether it was legally permissible for the department to
make that call.
Observers say it's likely the judge ultimately will decide whether insurers
deserve an increase and, if so, how much.
Insurers also say their profits will be hurt because a state-run fund that
covers workers who have pre-existing injuries has more than doubled the
assessment it charges insurance carriers.
The Second Injury Fund was established after the Second World War so that
companies could hire injured veterans without worrying about them getting hurt
on the job and causing their employers' premiums to go up.
All workers' comp insurers chip in to the fund and bill it when a
policyholder submits a claim. The problem, insurers say, is that the fund this
year is raising its assessment rate to 28.5 percent, up from 11.1 percent,
meaning tens of millions of dollars more in charges.
That increase, along with uncertainty over the outcome of the workers' comp
rate request, leaves insurers wondering whether they can make a profit in South
Carolina.
Eleanor Kitzman, director of the Department of Insurance, said Tuesday she
understands why a handful of insurers are taking a "wait-and-see" approach.
"They tell me this more selective look at the state is temporary," Kitzman
said. "They are in no way pulling up their stakes and leaving the state for
good. But they might if major reforms aren't addressed."
Kitzman said a healthy balance must be struck so that companies can insure
their workers and insurers can make a profit. She added that most of the
concerns she is hearing from insurers have to do with the Second Injury Fund and
not her department's decision to deny the rate request.
"The fact that the department denied the increase should not be construed as
us thinking the current rates are adequate," Kitzman explained. "There's no
disputing they (insurers) have paid out more in losses than they've received in
premiums. But our analysis thus far has been that 32.9 percent is excessive."
Officials at American Interstate Insurance Co., also known as Amerisafe,
didn't return calls seeking comment Tuesday.
The carrier ranks among the state's top 15 workers' comp insurers. According
to one area agent, it will no longer write new business and intends to raise its
rate by 25 percent, the maximum allowed under the law.
That agent, Todd Tyler of Commonwealth Insurance Group, said "some insurers
are telling me, 'We're done if we can't make money here.' "
Tyler also said a subsidiary of Liberty Mutual, the state's fourth-biggest
insurer, is cutting back on the number of agents it has here, though it isn't
pulling out of the state. "In effect, that amounts to less business they'll do,"
he said.
Glenn Woytisek, who manages workers' comp premiums in South Carolina for
Michigan-based Accident Fund Insurance Co., said his company is sitting tight
for now, but the Palmetto State has fast become one of the most expensive places
to do business out of the nine markets it operates in.
"If you noticed across the country, there are a lot of states actually
decreasing their rates," Woytisek said. "We need to see a happy medium here
where insurance carriers, companies, the workers' comp commission can all come
to a reasonable middle ground and resolve this."
Matthew Mogul can be reached at 937-5594 or mmogul@postandcourier.com.
