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State Insurance Department OKs 35 percent increase
Coastal property owners who are insured through the so-called wind pool will
see their rates increase an average of 35 percent come Oct. 1.
The state Department of Insurance announced the higher rates Monday for
areas near the ocean where a state-sponsored group provides wind and hail
coverage to people who can't obtain it through private carriers.
The wind pool is overseen by the S.C. Wind and Hail Underwriting
Association, which had requested a 65 percent rate increase.
Smitty Harrison, the association's executive director, said the need for
higher rates was driven by the growing number of policies and the rising
cost of reinsurance, which is an insurance policy for an insurer.
Insurance Department Director Scott Richardson suggested that more increases
may follow.
As specified by a bill that lawmakers passed in May, the wind pool's rates
will be reviewed every six months to ensure the program is financially
sound.
"We expect small future adjustments to the plan ... as we continue to review
the performance of the wind pool," Richardson said.
Under a tiered rating system introduced June 1, wind pool customers closer
to the coast (Zone 1) will pay more than those farther inland (Zone 2). But
property owners can pay a lower premium if they choose a higher deductible
and pay more out of pocket when filing a claim.
For example, a home in Zone 2 — farther from the coast — with an insured
value of $250,000 and a 2 percent deductible would pay a premium of $2,133 a
year. But if the owner agrees to a 10 percent deductible, the annual premium
would drop to $1,431.
Property owners should think carefully before choosing their deductible,
said Allison Love, executive director of the S.C. Insurance News Service, an
industry-backed group. While a larger deductible may keep the premium down,
it can be expensive if triggered.
She noted the out-of-pocket costs for any claim on a property with an
insured value of $250,000 would range from $5,000 to $25,000, regardless of
amount of damage.
"People with higher deductibles should try to put some money aside," Love
said.
The last time rates increased for wind pool coverage was June 2006, when
premiums rose 4.3 percent. In 2003, they went up 11 percent.
Over the past year or so, property owners along the coast have had more
trouble finding affordable insurance, as some carriers weighed the risk of
paying out massive claims if South Carolina was hit by a major storm. As a
result, some of the country's largest property and casualty insurers began
limiting their coverage near the ocean.
In response, the Insurance Department twice this year has expanded the size
of the wind pool territory to include Awendaw, McClellanville, sections of
James and Johns island and large parts of Mount Pleasant east of U.S.
Highway 17.
But development and soaring property values have placed considerable strain
on the wind pool. Between 2001 and 2006, the most recent data available, the
number of wind-pool policies soared 51 percent, to 26,895. The value of
insured property jumped 156 percent, to $10.2 billion, over the five-year
period.
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