Take a deep breath and imagine this scene: You walk into a shop, see what you want on the shelf, but notice that there aren't any prices. Confused, you ask how much the item costs.
About the series
In South Carolina, your personal risk of suffering a loss in a hurricane is much less than insurance companies talk about.
Computer models, dubbed "black boxes," have a huge impact on rates, but we know little about how they work in South Carolina.
Shoppers are frustrated with rising rates.
For previous stories in the series, go to postandcourier.com/storm-of-money.
"Well, it depends on whether we're selling it today," the clerk says.
Rate boosts through the years
Year Total premiums Increase over Number of
year before insurers
2000 $548,135,864 7% 143
2001 $594,371,403 8% 138
2002 $654,943,787 10% 135
2003 $728,171,854 11% 130
2004 $831,931,463 14% 124
2005 $908,567,317 9% 115
2006 $989,535,852 9% 108
2007 $1,071,902,394 8% 110
2008 $1,124,766,993 5% 109
2009 $1,164,742,541 4% 118
2010 $1,211,841,261 4% 122
"And by the way, do you have a good credit score, and would you tell me your education level? And would you mind answering other questions so we can decide whether to sell this to you?
Insurance insiders
South Carolina's insurance commissioners:
Ernst N. Csiszar, 1999 to 2004, appointed by former Gov. Jim Hodges, previously with Seibels Bruce Group, a publicly traded insurance carrier.
Eleanor Kitzman, 2007, founded a small insurance company in 1999.
Scott Richardson, 2007-2011, former owner of Carswell of Carolina Insurance.
David Black, 2011, former CEO of Liberty Life Insurance.
Gwendolyn Fuller McGriff, Dec. 28, 2011-present, acting administrator after Black's resignation.
"Oh, and we calculate prices with computer models that we're not allowed to talk about. The price sure depends on a lot of things, doesn't it? And it will cost even more tomorrow!"
Ways to save on home insurance
Shopping for homeowner's insurance is like learning calculus or Portuguese; it takes time but is possible. Here are some tips:
1Shop around with several agents to make sure they are coming up with the best deals for you.
2Look at postandcourier.com/storm-of-money for a comparison of companies offering insurance in your county. Call them to determine if they are writing policies in your area.
3Visit the National Association of Insurance Commissioners website, naic.org, to determine which companies have the most complaints. Drop companies with lots of complaints.
4Investigate whether you could save money by strengthening your house. Visit South Carolina Safe Home's website, scsafehome.sc.gov for information about grants and tax credits.
Appalled, you threaten to call state regulators. "Good luck," the clerk says.
When it comes to property insurance, homeowners face a similar set of hurdles:
Unlike agencies in other states, South Carolina's Department of Insurance doesn't offer the public simple ways to help consumers find deals or learn about rate increases.
South Carolina lawmakers enacted laws that enable insurance companies to increase rates without prior approval or public hearings as long as rate hikes are lower than 7 percent.
Meanwhile, they eviscerated budgets of two government agencies charged with monitoring rates.
Insurance companies are using controversial computer models to calculate rates, but South Carolina has yet to examine these models in depth.
Is the playing field level for consumers? "Definitely not in South Carolina," said Robert Hunter, a former insurance commissioner in Texas now with the Consumer Federation of America. "You have very weak regulations."
Limited help
Homes, like people, have their quirks. In calculating a premium, an insurer may ask about a building's wiring, roof type and/or age. The company may hire an inspector to look at the water heater and take pictures of the paint job.
Many also calculate rates using credit scores and education levels of customers, a move insurers say identifies people likely to make more claims. Critics say these practices unfairly affect the poor.
All these variables are buried in rate filings sent to the S.C. Department of Insurance and other states, which can be good news for consumers.
Using this information, for instance, Texas crafted a website where consumers quickly plug in information about their homes and lives. In seconds, they get a list of companies, rates and contact information, along with a roster of potential discounts for alarms, sprinklers and other options that can help consumers shop for better rates.
And South Carolina?
The Insurance Department has a brochure on its website, along with a spreadsheet that lists sample rates from just 20 companies. (The Post and Courier made this information searchable by county at postand courier.com/storm-of-money.)
The agency spreadsheet also is limited to rates for a recently built house; rates for older homes can be much higher.
The Insurance Department also fails to let consumers know about looming rate hikes in any useful way, even though insurers send them notices about rate hikes months in advance.
Agency spokeswoman Ann Roberson said the information about rate-hike proposals is on its website, but acknowledged that it's difficult to find. The department is working on ways to make these rate changes more visible and user-friendly and hopes to roll it out this fall.
In the meantime, homeowners are more likely to learn about rate hikes in a letter, such as the one recently sent by Allstate to a Mount Pleasant homeowner.
It came with the friendly headline: "We want to help you manage your insurance costs," and then the less friendly sentences: "As you are aware, we've seen severe storms over the past few years in the state of South Carolina. Because of this and other contributing factors, a premium increase is needed. ..."
Free-market stance
Elected leaders and the courts long have recognized the importance of insurance and the vulnerability of consumers. People who have suffered losses are especially sensitive to insurers that hold up claims or try to pay less than what customers truly lost, and communities hit by disasters depend on insurance to get their economies rolling again.
A century ago, insurance companies argued that they should be free from government regulation, but the U.S. Supreme Court settled the debate in 1914. "The business of insurance is so far affected with a public interest as to justify legislative regulation of its rates," the court said.
In South Carolina, the Insurance Department is responsible for making sure companies are solvent and set rates that are fair to insurers and property owners alike.
Hunter and other insurance experts said South Carolina's approach shifted in the late 1990s. As insurance companies pulled out of coastal areas in droves, a succession of commissioners — all former insurance company executives — worked hard to reduce regulations.
They argued that a free-market stance would draw more companies to the state and increase competition, an approach that had some success in the auto insurance business.
The situation came to a head in 2007 as insurance companies threatened to pull out of even more areas along the coast. Fearing that homeowners might not be able to get coverage at all, the General Assembly in 2007 expanded the "wind pool," zones near the ocean where homeowners were guaranteed limited and expensive wind hazard coverage with the S.C. Wind & Hail Association.
Lawmakers also allowed insurance companies to increase their rates without first seeking state approval as long as those increases averaged less than 7 percent.
Since then, insurance companies have pocketed hundreds of millions of dollars. In 2007, private insurers collected about $987 million in premiums from property owners. By 2010, it was more than $1.2 billion, according to a Post and Courier analysis.
A handful of insurance companies have entered the market — today, the state has more than 120 companies writing home insurance policies, up from 108 in 2006.
The industry, however, continues to be dominated by a few insurance company groups. Eleven corporations, including State Farm and Allstate, control more than 70 percent of the state's home insurance market.
Meanwhile, the two agencies that monitor these corporate juggernauts have seen their budgets and staffs whacked.
Last year, the Insurance Department handled the credentials of more than 170,000 licensed agents, adjusters and other insurance professionals, fielded more than 60,000 telephone and written complaints, and processed more than 10,400 rate filings. To do all this, the agency has about 80 employees, down from 145 five years ago.
Lawmakers not only cut the Insurance Department but also de-fanged the Department of Consumer Affairs, which had saved homeowners buckets of cash by challenging rate hikes.
In 2003, for instance, State Farm sought a 29 percent statewide increase. The Consumer Affairs Department fought the increase until State Farm agreed to a 19 percent hike.
But, like the Insurance Department, Consumer Affairs is a shell of its former self, with just 32 employees, down from 72 in 2007. It received about $620,000 from the state's general fund last year, down from about $2 million in 2007.
The agency has only two lawyers to study insurance cases and no support staff, and almost no money for hiring experts with insurance expertise. "At the lowest point, we had only 28 people," said Carri Grube Lybarker, acting administrator.
South Carolina insurance industry officials argue that the insurance climate here is much healthier than other states.
"South Carolina has promoted competition in the voluntary market as the answer to coastal issues where many states have suppressed rates and made the market of last resort the most competitive organization providing coverage," said Justin Tomczak, spokesman for State Farm.
Homeowners may not feel the same way, said Hunter, of the Consumer Federation of America. "Is (the insurance climate in South Carolina) great? Yeah, it's great if you don't have to pay the premium."
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