McConnell takes aim at insurance companies
Mark McElheney, a real estate agent who lives on James Island, had a home
sale fall apart this week because the buyer couldn't find insurance coverage
for less than $4,000 a year.
McElheney couldn't really blame the guy. His own underwriter recently and
unceremoniously dropped his policy, and McElheney is now paying almost
double for insurance on his home.
"There were no claims, no anything, but when the time came to renew, they
said 'We're discontinuing your policy,' " he said Thursday.
And after negotiating new coverage, the company said McElheney would have to
transfer his automotive business and take out a $50-a-month life insurance
policy.
"At that point, you just want it, so you do it," McElheney said.
Senate President Pro Tempore Glenn McConnell has listened to a flood of
similar stories in recent weeks. In response, the powerful Charleston
Republican shot back with legislation Thursday, taking aim at insurers that
are abandoning some homeowners along the South Carolina coast and hitting
others with hefty rate increases.
McConnell said it was one woman's story that "broke the camel's back." After
she paid premiums for 51 years and her home survived three major hurricanes,
the woman's insurance company canceled her policy.
"I think these insurance companies should have a social conscious about what
they are doing to these people," he said. "I think it is fundamentally
unfair after 51 years to just leave her out there."
McConnell filed a bill that would forbid underwriters from dropping a policy
that has been held for at least three years, with some exceptions. The
measure would also prevent carriers from requiring customers like McElheney
to buy other forms of insurance before renewing their homeowner policies.
McConnell has described the measure as an effort to address complaints about
surging premiums and dropped coverage. To date, about 20,000 policies,
primarily along the coast, are being dropped by companies seeking to reduce
exposure to hurricane damage.
"To me, what's so wrong about this is they got her money for all of those
years," he said. "They can't walk away from the risk and leave her out there
just months before the hurricane seasons starts. It's cherry-picking the
market in my opinion."
Leanne Holroyd, who moved to Mount Pleasant from Indiana in 2004, was one of
the homeowners phoning McConnell in recent weeks. She and her husband,
Ralph, have moved 11 times, and insurance had always been an afterthought -
until after they relocated to the Lowcountry. Their last policy, which cost
$3,600 a year, was canceled in January. The Holroyds could not find a
comparable replacement for less than $9,600.
"I about died," she said. "For a month all we were thinking was, 'We're not
going to be able to keep the house.' "
The couple eventually found a policy for $5,000, but it offers less
coverage.
McConnell's bill marks the second time this year he has called out insurance
companies for heavily hedging their bets on the coast.
In early February, he and a bipartisan coalition of lawmakers called for a
new state-owned body to insure property owners in all coastal counties, not
just those communities closest to the water.
The bill, which was modeled after similar programs in Florida, other Gulf
Coast states, and Hawaii, would create a tax-exempt state authority that
could sell bonds to insure properties.
That first proposal also would strip the governor's office of its oversight
of the Insurance Department by making the commissioner's post an elective
office, rather than appointive position. McConnell has said the change would
give the agency a "consumer-protection" focus.
The department has been buffeted by controversy and criticism, much of it
stemming from what is being called the coastal insurance crisis. Eleanor
Kitzman, who led the agency for the last two years, resigned in January
after pushing to expand areas that are covered by state-sponsored insurance,
an idea that Gov. Mark Sanford has argued against.
Former state legislator Scott Richardson, the newly appointed commissioner,
has echoed the governor in calling for "market-based reforms" and cautioning
against regulatory measures that could drive off skittish underwriters.
Sanford was still poring over McConnell's latest bill Thursday, but he is
viewing any insurance legislation with extreme caution, said spokesman Joel
Sawyer.
"What we want to avoid is any kind of knee-jerk reaction that sends us down
the same path Florida has been down," Sawyer said. "Every time Florida has
tried to legislate a solution, it has created another set of problems that
the governor has had to clean up by executive order."
Policy changes
State Sen. Glenn McConnell is calling for four major reforms to South
Carolina's insurance laws. Under his proposed bill:
1. Insurers would not be allowed to cancel or drop a homeowner's policy
solely because the homeowner does not buy other insurance (such as
automotive coverage) from them.
2. An property owner whose policy is being dropped would have to be notified
at least 100 days before the expiration date or, in some cases, by June 1
(the start of hurricane season).
3. Carriers could not cancel or drop a policy or increase the deductible if
the policy has been in effect and renewed for at least three years.
Some of the exceptions:
--The policyholder has not paid the premiums.
--The policyholder has materially misrepresented facts or breached the terms
of the contract
--The risk has changed substantially. If weather-related, the insurer must
demonstrate that its decision is based on statistical climate data that
applies to South Carolina.
--The policyholder has received claim payments that exceed half of the
premiums paid.
--The insurer can show that continuing the policy would endanger its
solvency or place the insurer in violation of state law.
4. The state would create an expert commission to measure and project South
Carolina's exposure to hurricanes. That data would then be used to set
rates.
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