By Jules Anderson
With enormous population growth and ever more expensive coastal-area homes, it is simply not possible for a single insurer to collect enough premiums to cover all possible property loss. In 2008, Hurricane Ike cost Texas insurers more than they had collected in premiums in the previous 38 years.
To get the highest solvency ratings from agencies like Standard & Poor, companies must be able to cover losses from two once-in-a-hundred-year storms in a row. Sometimes, even with the widest possible pool, insurers can’t do this. They are “overexposed” and have to greatly increase rates or retreat from coastal areas.
In 2007, the South Carolina General Assembly passed the Omnibus Coastal Property Insurance Reform Act. As one part of that act, the state expanded the areas that could be covered by the SC Wind and Hail Underwriting Association. Commonly known as the Wind Pool, this independent association was created by the state in 1971 to serve as the insurer of last resort for homeowners and businesses in a narrow coastal zone.
The 2007 expansion also allowed companies to write other types of property and casualty independent of wind coverage in the expanded area. These provisions have proved worthwhile as at least 13 additional insurance companies now cover coastal South Carolina.
Recently, I have heard some outrageously misinformed and exaggerated statements about the impact of the Wind Pool, such as: “The Wind Pool area is purely arbitrary and politically inspired. The Wind Pool has caused rate hikes in surrounding areas. I have to use the Wind Pool coverage because my insurance company won’t cover me anymore.”
None of the above is true. Here’s what’s true: you have options.
Don’t get me wrong. If, for some reason, you really do have to avail yourself of Wind Pool coverage, South Carolina has the best managed Wind Pool in the United States, but there are numerous insurers who are not over-extended in coastal areas that can provide the total property insurance package for you.
So, shop around. You don’t have to call me. There are lots of good insurance agents to help you with your homework. Just don’t sit in the Pool complaining. Do something!
Jules Anderson is president of Anderson Insurance Associates and chairman of the Independent Insurance Agents and Brokers of South Carolina (IIABSC).