ORDERS:
CONSENT ORDER
1. On December 3, 1997, Philip S. Porter, Consumer Advocate for the State of South
Carolina (the Consumer Advocate) requested the South Carolina Department of Insurance (the
Department), to initiate a public hearing on the filing of South Carolina Wind and Hail Underwriting
Association (the Association) requesting an approval of an overall increase of 23.9% of its wind and
hail property and casualty rates.
2. On December 5, 1997, the Department filed with the Administrative Law Judge
Division an Agency Transmittal Form requesting a public hearing.
3. The Administrative Law Judge Division assigned this matter to Honorable Marvin
F. Kittrell under the Docket No. 97-ALJ-09-0723-CC. The hearing on the matter has not yet been
scheduled.
4. Meanwhile, the Consumer Advocate and the Association engaged in discussions with
respect to this filing and came to the following agreement.
The Consumer Advocate and the Association note that the latest hurricane loss projection
modeling techniques recognize that the probability of a hurricane making landfall varies
geographically along the east coast. The models derive landfall probabilities by Zip Code and
provide for subsequent weakening of the hurricane based upon the land friction and other criteria
present at each Zip Code along the entire east coast. Private insurers that write homeowners and
other property insurance are currently using models that take these, as well as other criteria, into
account in order to determine the expected loss in a given Zip Code from hurricanes that may occur
during the policy period.
The Consumer Advocate believes that if the Association continues to produce hurricane rates
in a manner that provides for the same rates along the entire South Carolina coast, then those rates
will be higher for some Zip Codes and lower for other Zip Codes than the insurance industry's
modeling techniques derive as adequate. This places the Association in an adverse position,
allowing the insurance industry to benefit by writing policies that the Association overprices and
ultimately leaving the Association with only under-priced policies.
The Association agrees that as a part of its 1998 rate review, its Actuarial Committee will
examine the feasibility of developing different rate levels by county. The Committee will also look
at any other appropriate available alternative sub-territory approach. Once this rate review is
completed, the Actuarial Committee will offer its recommendations as to whether the Association
should maintain one rate or offer different rate levels by geographical location. The Association will
share both the conclusion and the supporting data with the Consumer Advocate. This will allow all
parties involved to have the information necessary to evaluate the approach being used in future rate
filings.
The Consumer Advocate recognizes that, due to time constraints in the present filing, it may
not be feasible to introduce any new methodology in the filing under consideration. The Association
and the interested parties need to study these issues closely before any changes envisaged above are
made.
5. The Respondent, South Carolina Department of Insurance, it its Prehearing Statement
of December 22, 1997, stated that it had no opposition to the filing. Since there are no unresolved
issues remaining, all parties agree to the dismissal of this matter.
NOW, THEREFORE, IT IS ORDERED that this case is dismissed, and
IT IS SO ORDERED.
MARVIN F. KITTRELL
ADMINISTRATIVE LAW JUDGE
February 10, 1998
Columbia, South Carolina.
WE CONSENT:
J. Smith Harrison, Jr., CPCU
Executive Director
South Carolina Wind and Hail
Underwriting Association
Post Office Box 407
Columbia, SC 29202
Gwendolyn L. Fuller, Esquire
General Counsel
South Carolina Department of Insurance
Post Office Box 100105
Columbia, SC 29202
Hana Pokurna-Williamson, Esquire
Staff Attorney
South Carolina Department of
Consumer Affairs
Post Office Box 5757
Columbia, SC 29250-5757 |
