The objective of risk resilience is to help ensure people can overcome a potentially catastrophic event and return to normal life as quickly and effectively as possible.  It is one of the most talked-about topics today in the field of disaster prevention and management.  While the insurance industry is not directly involved in catastrophe management or in mitigating the frequency or severity of natural hazards themselves, we do help reduce these types of risk by enabling communities and individuals to manage exposure and reduce vulnerability.  Insurance plays a key role in this context, since it contributes to prompt and reliable financing of recovery measures.  South Carolina is no stranger to natural disasters with five weather related events in the last five years.  Each state is faced with its own national disasters, from wildfires to hurricanes to tornadoes to earthquakes.  This is obviously a topic with innumerable facets and education of our consumers is key.  No matter the type of disaster, it is important that all consumers be educated on how to plan, prepare and protect their home and family.  The less a society is affected by an extreme event, the faster it can get back on its feet.  The more losses are insured, the less of a decline there will be in economic output following a natural disaster, and therefore the faster the country can recover.

Flood insurance is a major issue, not only in my home state of South Carolina, but also nationwide.  According to FEMA, at some point over the last ten years, all 50 states have experienced floods.  Worldwide, floods are the most costly natural disaster and have affected the largest number of people.  Flood events are predicted to increase in frequency and/or severity in certain locations as the climate warms, requiring a new level of understanding and awareness about how communities and households can be more resilient.  Under 10% of people in South Carolina have flood insurance and most do not know that it is not covered under their homeowner’s policy.  The National Flood Insurance Program already is overtaxed and grossly underfunded.  I’m afraid it will become even more so as new flood zone maps from FEMA are adopted and implemented by local governments.  Some current maps are as much as 30 years old and do not anticipate the accumulating effects of population shifts, property developments, and climate change.  The Department of Insurance will propose legislation in the upcoming session to encourage the private insurance market to write flood insurance in completion with the NFIP in South Carolina.  

Long-term care insurance is one of the biggest issues facing the industry these days.  Many people will need long-term care at some point in their lives, and long-term care insurance plans ostensibly help to offset those high costs.  Unfortunately, decades ago, companies oversold and underpriced the product.  At the same time, long-term care costs have risen sharply.  They are now more than 10 times what they were in the 1970s and the current premiums are not sufficient to cover losses.  In the last several years, we’ve seen rate increase requests that are astronomical, some upwards of 80 percent.  As insurers lost money, they began to drop out of the market.  Of the 100 or so companies that were selling long-term care insurance in the United States at one point, there are less than a dozen selling these plans now.  Then you have consumer expectations for policies, which were based on industry promises that simply could not be kept, like premiums would never increase.  Instead, consumers now face the choice of paying constantly increasing premiums or facing greatly depreciated insurance.  The policy promises need to be fulfilled, as regulators must maintain the consumer confidence in long-term care products.  But those who might consider buying it now have fewer and less attractive options.  The NAIC is tackling this national issue with a high-level commissioner-only task force to address the multiple issues of long-term care insurance.  

Finally, Director Farmer intends to continue in his role as head of the South Carolina Department of Insurance.  In addition to regulating the insurance industry on a daily basis, Governor McMaster announced the Department of Insurance as the lead agency in administering South Carolina’s approximately $34 million allocation under the Volkswagen Settlement.  Governor McMaster determined that the Department of Insurance would be the appropriate agency to handle the matter, since it had no regulatory authority over any aspect of the Volkswagen Settlement.  Pursuant to the settlement order, a trustee was appointed and rigid criteria were implemented for the distribution of these funds.  To date, the Department has distributed approximately $10 million, and an additional sum will be made available in the near future.