State Farm hike shakes up market

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http://www.charleston.net/pub/news/local/08sfarm.htm

State Farm hike shakes up market

Thursday, August 8, 2002

BY JIM PARKER

Of The Post and Courier Staff

State Farm's move to increase homeowners insurance rates on average 25

percent in Berkeley, ton and Dorchester counties - or $250 on a

$1,000 bill - is bringing into focus the painful cost of residing near the

Atlantic Ocean.

Consumers from St. to Folly Beach, McClellanville to Moncks

Corner will face the increase, effective on new policies in September and on

renewals beginning in October.

" You're kind of snookered, I think, " said Cochran, who lives

in Mount Pleasant with her husband and their two children. " You really don't

have any other choice. You've got to be insured. "

The increase, approved last week by the S.C. Department of Insurance,

averages 15.4 percent statewide. Some areas such as the Midlands will see

increases of 3 percent to 8 percent.

The policies cover the structure and contents for homeowners and

contents on renters. Mobile homes have a separate type of policy and are not

affected.

State Farm, the nation's largest property insurer, racked up record

losses nationwide last year as everything from the Sept. 11 terrorist

attacks to mold claims drove up payouts while investments soured in the

weakening economy and volatile stock market.

The Illinois-based carrier is the market leader in South Carolina's

more than half-a-billion dollar homeowners business, with 23.5 percent of

premium dollars.

Even after a rough year, State Farm is one of the few carriers_ that

will insure a new house, first-time homebuyer or residents moving to the

coastal counties, said Bruce White, company spokesman. " The rate increase

had something to do with it, to still be able to do so, " he said.

Also, the insurer offers incentives to roll back some of the price

hike. It will offer a 5 percent discount to customers who have both home and

auto policies with State Farm, up from 2 percent last year. In 2001, the

company instituted a 10 percent discount for homeowners who install

hurricane shutters or protective glass, he said.

State Farm is not alone in seeking rate increases in the past couple of

years. Allstate, which ranks second in market share, boosted its premiums

8.5 percent statewide last year and up to 23 percent on the coast.

Nationwide, which places third, boosted rates 9.7 percent in South Carolina,

but just 3.8 percent in the ton area.

State Farm is the only one of the three carriers - which combined have

close to half the market -to ask for and receive a premium increase this

year. Last year, the company raised rates 19 percent in ton, Berkeley

and Dorchester counties and 6.2 percent statewide.

White acknowledged that customers might look elsewhere after seeing

their bills. " But if you shop around, you will find we are very comparable, "

he said. " If you have a major loss, we will be there to cover it, " he added.

The S.C. Department of Consumer Affairs had originally protested the

hike as excessive. But the agency quietly dropped objections when two

independent actuaries concluded that the hike was justified based on State

Farm's estimated $28 million in losses last year in South Carolina. The

state Department of Insurance earlier found the rates to be necessary. The

increase, first proposed March 5, is expected to generate $19 million in

additional premiums.

Even while backing the increase, regulators made pointed comments about

State Farm's rates and coastal coverage in general.

" Several insurers writing homeowners' policies have filed requests for

increases due to an increase in claims activities over the past five years, "

said Ann Roberson, insurance department spokeswoman.

" The department is concerned about these increases and particularly

about the increasing cost of insurance along the South Carolina coast. To

that end, we continue our efforts toward maintaining a favorable environment

and attracting new companies to the market, " she said.

The insurance department, for instance, is sponsoring a conference in

ton on Aug. 21-22 to study ways to make coastal coverage more

affordable and available.

" Many stakeholders - the insurance department, legislators and

insurers - really need to look at it in a comprehensive fashion, " said Hana

on, staff attorney for the consumer affairs department. Consumers

need to be protected if a big storm hits the coast, she said. But on

questioned whether insurers were using the potential of a major hurricane as

a " big scarecrow " to boost rates.

White said the rates are justified. A hurricane can bring losses of

$50,000 a home, something the company can't recoup in the life of a policy,

he said.

Cochran said her family already was looking at switching to another

insurer such as USAA, their auto carrier. But they learned that the carrier,

which specializes in coverage for military families and relatives, was not

writing _new business in the ton_area.

" With ours renewing in May, that's going into hurricane season, " she

said. " If it's 25 percent, that's going to hurt. "

Jim covers banking, insurance and investments. He can be reached

at 937-5542 or jparker@....