As I continue to pour over newspaper articles and speak to residents about our newly expanded wind pool one thing is coming through clearly.  It is best stated in Mr. Eli Lehrer's Issue Analysis of the South Carolina Insurance Reform Legislation. He stated, “the reforms are far from perfect; they represent little more than baby steps in the right direction, and, with poor regulatory authority could actually end up damaging the state.”

The wind pool was envisioned to be an insurer of last resort for those that could not find insurance in the private market. Unfortunately, since as stated on the South Carolina Wind and Hail Underwriting Association website, “all property and casualty insurance companies conducting business in the state are required to participate in funding the plan and share in any losses and profits” there is no reason for companies to write insurance inside the wind pool.  This seems to be the reason companies are gladly writing fire and theft insurance but writing wind and hail in the wind pool association.

Premiums seem to be marked to the wind pool rate even if the policy is written outside of but near the pool boundaries. Competition has been removed. The beneficiaries of the wind pool are hotels and condo associations. Their premiums had become too high and enlarging the wind pool brought their premiums down.  This as Mr. Leherer may create a sort of ‘wind socialism” similar to that which damaged the Florida market. Representatives from the insurance industry have been saying more companies are coming to South Carolina and the pool is lowering rates. Additionally, they have stated that residents wanted the wind pool enlarged.  

If more companies were coming to South Carolina and the rates were becoming more competitive there should have been no need to expand the wind pool. Let’s compare numbers. At the end of the 3rd quarter of 2007 the Wind Pool Association had taken in $62,337,381 in premiums, paid $6,208,180 in commissions and spent $1,613,900 in operating costs. In the corresponding quarter of 2008 the association had taken in $69,224,674 in premiums, paid $6,922,467 in commissions and had operating costs of $1,646,326. Contrary to what is being said the pool is not encouraging carriers to compete and more premiums are coming to the wind pool. If this is to truly be an insurer of last resort the state should reduce commissions from the current 10% of premium paid to no more than 2% which would encourage agents to look at all companies to find the most competitive and remove the Wind Pool Association as the default recommendation.  Insurers should be able to price insurance ensuring those taking the greatest risk pay the highest premiums and those taking less risk pay less.  The wind pool should be based on actual loss data more so than “residents want a larger pool.”  The mix on the board of directors should be changed from 13 representatives from the insurance industry and 4 consumers to some number that gives the consumer equal input with the industry representatives.  I will close with one last quote from Mr. Leherer’s study, “In the long term, however, South Caolina's wind pool could well turn into a subsidy scheme. It needs to be watched carefully.”