S.C. Senate Follows House in Approving Coastal Insurance Bill

The South Carolina Senate has approved omnibus legislation that backers hope will ease the insurance cost and availability crunch facing coastal property owners in the state by providing discounts and tax breaks.

The legislation is part of the state’s response to insurance rates rising as much as 400 percent in hurricane-prone areas. Insurers have cancelled policies and raised premiums along the coast, leaving some property owners uninsured or facing high premiums.

The bill, expected to cost the state $6 million, has already passed the House. It is being promoted by Gov. Mark Sanford and Insurance Director Scott Richardson.

“The home mitigation part of this bill is huge,” Richardson says. “For every dollar invested in mitigation, the consumer realizes a $10 return.”

According to Richardson, insurers would be required to provide discounts for certain home mitigation practices and disclose the terms of these discounts in plain language.

In addition to obtaining tax credits for retrofitting properties in the mitigation process, consumers would also receive tax credits on the mitigation materials they buy. The bill also allows for tax credits – up to $1,250 – for lower-income property owners who pay more than 5 percent of their incomes towards insurance premiums.

The bill calls for matching grants for homeowners who retrofit their homes with prescribed preventive measures. Eligible properties must have a homestead exemption with an insured value of $300,000 or less. Grants would be limited to $5,000, although low income homeowners would be eligible for the $5,000 grant without having to meet the matching requirement. Matching fund grants would also be available for local governments to encourage projects that reduce hurricane damage to single-family, site-built homes.

In addition, consumers would be allowed to contribute to personal catastrophe savings accounts to cover their deductible or self-insure – exempting them from state income tax on the sum they place in the account. If a deductible is less than $1,000, the consumer could contribute up to $2,000 to the account. If the deductible is more than $1,000, the consumer could contribute up to $15,000. For those who self-insure, contributions max-out at $250,000.

“These options give opportunities for each end of the income stream,” Richardson said.

It would also allow homeowners to put money into tax-deductible hurricane savings accounts. Residents could use the accounts to offset large deductibles or forgo insurance altogether and self-insure.

The tax breaks would not apply to vacation homes.

Insurers would receive tax credits for writing full-coverage policies along the coast.

The omnibus bill extends the notice period insurers must give policyholders when they are canceling or non-renewing from 30 days to 60 days.

The legislation requires hurricane modelers to provide state officials with a list of variables that are subject to insurers’ input.

Sanford spokesman Joel Sawyer said there are two ways a state can handle skyrocketing rates. “You can either drive insurers out of the market and drive up the rates or try the approach we’re moving for and drive costs down,” he said.

Richardson said he has been working to keep private insurers in the market and create a tax incentive for them to write coastal policies.
“I’ve spent a great deal of time working with insurance companies and I have personally had conversations with many carriers. Insurers will get a 25 percent tax break on all full coverage polices written in coastal areas – it’s enticement for the companies to stay in the market.”

In good news, Allstate Insurance has decided against dropping 2,500 policies, Richardson noted. He added that Companion Property & Casualty Group is adding $125 million capacity and Ironshore is coming in to write condo properties on the coast.