S.C. Car Insurance Rates Outpace U.S. Despite 1999 Deregulation Law

Insurance rates for drivers in South Carolina have been rising faster than the national average, according to a new report. The state’s drivers on average spent $702.44 for auto insurance in 2002, an increase of 10.4 percent from the year before, according to an annual survey released by the National Association of Insurance Commissioners. The national average that year rose 7.8 percent, to $773.68.

The figures suggest that a 1999 deregulation law meant to spur competition and keep price increases down isn’t working.
The report shows S.C. drivers faced steeper rate increases in 2002 than drivers in nearby states. Rates rose 5.1 percent in Georgia, 4.1 percent in North Carolina and 2.5 percent in Virginia.

Florida equaled South Carolina with its own 10.4 percent increase.
In addition, last year the S.C. Department of Insurance approved rate-increase requests by the two top auto insurers, Allstate and State Farm, which together insure one of every three drivers in the state.

Deregulation was intended to bring more insurance companies to the state because the law now allows them to raise rates as much as 7 percent without state approval. The growing number of insurers would mean more consumer choice and more stable, if not lower, rates.
But it seems only half that formula has panned out.

In 1997, when the deregulation law first was announced, the number of insurers doing business in South Carolina was 79. That number grew to 161 in 2002.

Still, rates have showed no signs of stabilizing.

The push to pare regulations was promoted by the state’s former insurance commissioner, Ernst Csiszar, who stepped down in August to take a job with a major insurance trade group.

He was opposed during his five-year tenure by consumer advocates who claimed that, as a former industry insider, Csiszar was more interested in buoying big business interests than watching out for consumers.

Marty Simons, the former chief actuary at the state Insurance Department, said the rate increases come as no surprise.

“I have been saying this was going to happen for years. There is a lag period between the time laws are approved and the increases take hold,” said Simons, who runs his own actuarial and consulting business in Columbia and advises state governments around the country. “I believe this is a direct result of the deregulation. There’s a definite connection.”

Dean Kruger, the insurance department’s chief actuary, said other factors played into the increases and that it “in no way is an indictment of the system and the deregulation efforts.”

“Just look at how much of a problem the uninsured-motorist problem has been here. We have seen rates go up more than states like North Carolina because there they had better enforcement,” Kruger said. “Now we have those new laws … that allow us to crack down on drivers who don’t have insurance, and this could definitely help.”