« Back to News Room South Carolina Coastal Homeowners' Insurance Facts January 9, 2009 FOR IMMEDIATE RELEASE Russ Dubisky, Executive Director 803-252-3455 or cell phone 803-708-5271 russd@scinsnews.com Why have consumers seen a rise in the cost of insurance along the coast of South Carolina in the past year? 1. Tremendous increase in growth, development and population along the coast Horry County has grown 58% from 144,053 to 226,992 between 1990 and 2005. Beaufort County has seen a 60% increase in population from 86,425 to 137,849 between 1990 and 2005. Charleston County has seen an increase of 12% from 295,039 to 309,969 since 1990. Berkeley County has increased 18% from 128,776 to 151,673 since 1990. Dorchester County has increased 36% from 83,060 to 112,858 since 1990. Georgetown County has increased 32% from 46,302 to 60,983 since 1990. Jasper County has increased 38% from 15,487 to 21,398 since 1990. Colleton County has increased 15% 34,377 to 39,605 since 1990. (Sources: Charleston Metro Chamber of Commerce, SC Statistical Abstract, US Census) 2. Tremendous increase in the value of homes along the coast – The values of homes in Charleston, Berkeley and Dorchester Counties have increased 120% between 1996-2005 according to the Charleston Metro of Commerce. The values of homes in Horry and Georgetown Counties have increased 115% between 1996-2005 according to the Myrtle Beach Chamber of Commerce. SC has nearly $200 Billion of insured coastal property which is the 8th largest in the nation and 28% of the overall insured property in the state of $698 Billion. (Source: Insurance Information Institute) By comparison, North Carolina has the 11th largest amount of insured coastal property - $133 Billion – but only 9% of the overall insured property in the state. (Source: Insurance Information Institute) The direct written premium for homeowners’ insurance in SC was $989,535,852 million in 2006. (Source: SC Dept. of Insurance). Hurricane Katrina equaled 25 years’ worth of premiums in Louisiana and 17 years’ worth of premiums in Mississippi. (Source: Insurance Information Institute) 3. Changes in cost of Reinsurance (the insurance that insurance companies have to buy) - Reinsurance prices fluctuate as the financials markets and investments fluctuate and as catastrophes occur around the world. Reinsurance costs have increased with the January 2009 renewals. (Sources: Insurance Information Institute, Reinsurance Association of America, SC Wind & Hail Underwriting Association, surveys of insurance companies) 4. Increase in Cost of Construction, labor, materials - The national construction cost index rose 41% since 1995. The costs have probably been higher along the coastal areas, but that data was not immediately available. (Source: Insurance Information Institute) 5. Catastrophe Modeling Companies are predicting a much higher storm frequency and severity in near future. This is based upon the latest meteorological predictions for the next 15-20 years. The SC/GA/NC area catastrophe models are showing a 40% increase in frequency and a 25% increase in a 1 in 50 year event and a 1 in 500 year event. (Source: Insurance Information Institute) 6. Rating agencies such as AM Best, Weiss and Standard & Poors who rate insurance companies look at a company’s exposure, capital in reserve, etc. and have been placing stricter guidelines on companies. Average Cost of Homeowners’ Insurance in South Carolina: SC ranks #16 in the average cost of homeowners insurance. The average SC dwelling fire and homeowners insurance policy costs $817 compared with $764 countrywide. (National Association of Insurance Commissioners, 2005 Homeowners Insurance Report, released 12/07) Average Cost of Renters’ Insurance in South Carolina: SC is below average in the cost of renters insurance with the average renter’s insurance policy costing $189 compared to $193 countrywide. SC ranks #19 in the U.S. (National Association of Insurance Commissioners, 2005 Homeowners Insurance Report, released 12/07) Homeowners’ Insurance Profits in South Carolina between 1985-2005: According to the National Association of Insurance Commissioners, homeowners’ insurance companies lost 4 cents for every $1 of premium they took in between 1985 and 2005 in South Carolina. The combined loss ratio (losses plus expenses) between 1985 and 2005 was 104%. A combined ratio above 100 indicates that a carrier is paying out more in claims and expenses than it is taking in premiums. In 1989 (the year of Hurricane Hugo) homeowner insurance companies in South Carolina paid out $5.55 for every $1 they took in. (NAIC special study for SC 2007) Hurricane Hugo still ranks as the 7th most expensive hurricane in U.S. history. (III 9/08) Insurance companies need to be able to make a profit in order to have assets and surplus available to pay potential claims when claims arise. Some important points for consumers to understand about the South Carolina coastal homeowners’ insurance market: You pay a rate to make the risk that your property presents and if you live along the coast, you pay a higher rate to match your higher risk. You can still find insurance along the coast, but you might not like what you have to pay for it. Insurance companies have paid out $1.12 for every $1 they've brought in in premium in the past 17 years, according to the Insurance Information Institute. Homeowners’ insurance has been under priced for many years. Insurance companies don't want to raise rates and don't want to lose business, but have to raise rates to make sure they have enough capital in reserve. It's going to take you longer to find insurance. Don't wait until the last minute - especially if you're closing on a new house. When you're buying a home, allow at least a week to two weeks to shop around and make that choice. Check different companies and different agencies. Insurance companies have different target markets. Companies have to be approved by the SC Dept. of Insurance. There are “admitted” or “standard” carriers for insurance and there are “Excess and Surplus Lines” or “Non-Admitted” carriers. Admitted carriers are regulated by the SC Dept. of Insurance and the Excess and Surplus Lines or Non-Admitted carriers are exempt from rate and form regulation by the SC Dept. of Insurance. The Excess and Surplus Lines or non-admitted carriers specialize in insuring homes with a greater risk such as those along the coast. Most statewide rate increases filed recently by standard insurance companies have been 6.5-7.0%. Most rate increases along the coast have been in the range of 20-25% in SC, although some have been higher. The condominium market has seen higher rate increases. In FL and MS they've seen rate increases of 60-100%. Homeowners in the upstate of South Carolina, on the other hand, have seen rate decreases of as much as 50%. Homeowners’ insurance was expected to go up about 4% nationwide in 2007, but in coastal areas was expected to rise 20-100% depending on where you live, according to the Insurance Information Institute. Rates are made for potential future losses. Insurance is regulated state by state. People who live in South Carolina pay a rate to match the risk their property presents. The historical data helps insurance companies determine future risk and future rates. The coastal homeowners’ insurance market is experiencing a basic law of economics; supply & demand – price is maximized when supply decreases, as demand increases. The capacity of private insurance companies is limited. An insurer can only absorb a certain amount of risk or exposure in any given area. That limits its ability to continue to write when that point is reached. Homeowners want to make sure their companies have enough money to pay their claims which means insurance companies have to charge enough premium to have enough capital in reserve to pay potential claims. If South Carolina has a $10 Billion hurricane, insurance companies will need $10 Billion to pay the claims. Insurance companies want to make sure they take care of their current policyholders and many are managing their growth along the coast. Some aren't selling new business along the coast, but insurance is still available through many companies. If you have any concerns over a particular insurance company, you can check them out with the SC Dept. of Insurance’s Consumer Services Division at 1-800-768-3467. Homeowners need to make wise choices about where they buy their homes and consider building stronger, safer homes and businesses. Visit www.blueprintforsafety.org to get some helpful information. There are ways to save money on insurance by raising your deductible and many other things (see www.scinsnews.com for hints). Homeowners can also get discounts from some companies for having hurricane shutters, reinforced garage doors and wind-resistant glass. Visit Flash.org and IBHS.org for homeowner’s insurance information designed to help protect your valuable investments. (See recent news release for more information) Fewer than half of people in flood zones have flood insurance coverage and fewer than 1% have it outside of flood zones, according to the Insurance Information Institute. Your basic homeowners’ insurance policy does NOT cover flood damage. Visit Floodsmart.gov to find out your relative flood risk today, online. Homeowners need to notify their insurer of improvements to their kitchen, new carpeting, new vinyl siding, etc. to make sure they are insured to value. The 1886 earthquake in Charleston would cost $38 Billion in 2005 dollars (according to AIR Worldwide). Even in California, only 12% of homeowners buy earthquake insurance. Your basic homeowners’ insurance policy does NOT typically cover earthquake damage (according to the Insurance Information Institute). Recent News Releases for Coastal Homeowners by the SC Insurance News Service available at www.scinsnews.com: New Companies Doing Business in South Carolina January 5, 2009 Hurricane Preparation Measures Can Qualify for Savings on Your Taxes - May 14, 2008 SC Wind & Hail Underwriting Association ("The Wind Pool") Fact Sheet September 11, 2008 Summary of Omnibus Coastal Property Insurance Reform Act of 2007 June 20, 2008 FAQs: Catastrophe Savings Accounts June 20, 2008 Know Your Insurance Deductibles this Hurricane Season - May 13, 2008 South Carolinians Need to Check Insurance before Hurricane Season Begins- May 12, 2008 Is Your Home or Business Insured for Flood? 30-day Waiting Period Required - April 17, 2008 Free, Downloadable Home Inventory Software Offered by South Carolina Insurance News Service - March 19, 2008 The South Carolina Insurance News Service offers tips for Coastal residents - April 3, 2007 Fact Sheet prepared by South Carolina Insurance News Service For more information on homeowners’ insurance, contact the South Carolina Insurance News Service at www.scinsnews.com or 803-252-3455. For more than 30 years, the South Carolina Insurance News Service, a nonprofit organization, has been providing free insurance information to consumers and the media about property and casualty insurance issues. The News Service is funded by insurance companies doing business in South Carolina. For more information, contact the South Carolina Insurance News Service at 803-252-3455 or use our contact form. Upstate man pleads guilty to insurance fraud July 30, 2010 Enjoy the ride on your golf cart or moped July 29, 2010 How to File a Claim After Storm Damage July 28, 2010 For News Service Members: Time to Register for the 2010 Annual Meeting and S.C. 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