The South Carolina Insurance News Service is a trade association that represents 14 of the leading property/casualty insurance companies that do business in this state. The News Service communicates on behalf of member companies to be an information-based resource for interested parties. The organization also believes in consumer initiatives that help develop a more educated consumer public.

Russ Dubisky, executive director, is responsible for providing accurate and authoritative information relative to the business of insurance to members of the media and the public. As guest of Newberry Notes this week, he is offering news and views by providing answers to insurance questions:

I would like to begin this interview with an important announcement regarding the recent confirmation of Ray Farmer as State Director of Insurance. Mr. Farmer has a background working with the industry, as a regulator, and with several associations and state governments. Clearly, our state’s Senate is confident that he understands the necessary balance that must be maintained between consumers and industry. Mr. Farmer has made it clear that he is focusing the department’s efforts on improved customer service.

The General Assembly convened in January and is currently considering several measures that would impact insurance in South Carolina:

First, Senate Bill 23 would prohibit insurers’ use of what is known as “telematics.” Telematics, also known as usage-based insurance, or probably more commonly called “pay-as-you-drive” insurance is a consumer product that helps drivers who drive less, and practice safe driving behaviors, receive discounts on their insurance.

While opponents feel that these products are an invasion of privacy as they monitor some specific driving behaviors, the industry has several points to help ease some of those concerns. First, usage-based products are optional. Second, usage-based programs are often “discount only products,” that offer discounts between 0 and X percent, meaning that it won’t penalize anyone who opts in. Most onboard devices monitor sudden changes in speed, and how often you drive your car. These devices do not monitor where you drive, speed limits, or use data to adjust claims.

A consumer-friendly bill, H 3409 provides protection to homeowners against the practices of an abusive minority of roofing contractors. (This legislation was introduced as a number of consumers in Georgia and the Carolinas were defrauded after signing contracts with unscrupulous roofing contractors to repair hail-damaged roofs.)

The legislation includes some consumer protections. For example, it provides that a homeowner who signs a contract for roof repair that he/she intends to be paid from the proceeds of a property casualty insurance policy can cancel the roofing contract within five business days after receiving notice from the insurer that any part of the claim or contract is not a covered loss under the insurance policy, for example if there was no storm damage to the roof. Except for such emergency services, the contractor may not require any payments from the homeowner until the five-day cancellation period has expired.

Generally, we provide the following advice to homeowners to help them avoid fraud in the first place: if you suspect your roof has been damaged by hail, talk to your insurance agent or company and ask for advice on how to proceed in getting repairs made. Take caution in selecting a roofing contractor. Investigate the track record of any roofer or contractor you consider hiring. Look for companies with a good reputation in your community. Call your Better Business Bureau for help, get references and do not give anyone a deposit until you are sure they are reputable.

Homeowners shouldn’t be pressured into signing a contract with a particular company.

Beware of a company that puts emphasis on how the homeowner can get a new roof paid for by the insurance company.

Keep receipts for temporary repairs and get estimates for the work.

Another item that has been gaining legislative attention is the Senate Banking and Insurance Subcommittee on Coastal Property.

Some coastal consumers have been actively pushing for insurance reforms that would require rate decreases. Proponents cite the relative infrequency of hurricanes, and conclude that rates must not be reflective of the risk.

“Risk” cannot simply be reduced to the measure of how often a specific event will occur. Hurricanes are, thank goodness, relatively infrequent events. However, when they do hit, they often cause damage that totals decades’ worth of premiums (that’s premium, not profit). For example, Hurricane Hugo would cause an estimated $10-$11 billion if it hit today. The HO insurance industry only collects roughly $1.2 billion each year in premium. The premiums collected pay for business expenses, employee salaries, and other claims that are more common like fire, water damage, hail, and liability. A portion of the premium is reserved for catastrophic events like hurricanes, and used to purchase reinsurance. The simple point is “risk” must be evaluated with a combination of frequency and severity.

The second point I would make is that insurance rates are based in part on the cost of repairing and rebuilding structures, and claims, on average, are getting more expensive. Claim severity in South Carolina has risen 155 percent in the past 15 years. Rates must factor increased costs in repairing and rebuilding homes

I would also remind consumers that insurance is a unique business in the sense that companies compete for the best risks available, and don’t simply focus on selling more policies. In order to spread risk effectively, insurers cannot be overly concentrated in any given area, especially in those areas susceptible to catastrophic loss. This means that in a competitive environment like South Carolina, companies offer those customers that are perceived to have the lowest risk, the best rates. If companies were forced to artificially suppress rates in coastal areas, they would lose the flexibility they need to offer better rates to those customers who have less exposure to loss.

There are other issues that our readers should be made aware of. We’ve recently seen some cold temperatures, and while the winter is drawing to a close, freezing or near freezing temperatures can expose homeowners to a number of different risks.

South Carolina has already seen several residential fires since the start of winter as more and more families try to stay warm using wood stoves, furnaces, space heaters and fireplaces.

Make sure you have at least 36 inches of clearance between the heat source and combustible materials such as bedding, furniture, books, and curtains. Also, make sure heaters are turned off when unattended and fires are completely out before you close the damper. Also verify that smoke detectors and fire extinguishers are in good, working order.

In case of fire, your basic homeowner’s, renter’s or condo insurance policy will cover resulting damage, both from the flames and water used to put out the fire. Check with your insurance agent to make sure you have the proper amount of coverage to repair or replace your structure and personal belongings.

Insurance-related topics? Readers are encouraged to visit our website at SCinsurance.net. Also, your local insurance agent, broker, or company is always a good resource for individuals who have questions about their own insurance.