Senate Bill Seeks to Make Top Insurance Post an Elected Position

January 31, 2012

Investigative Reports

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The NerveFive years after Grand Strand legislators failed in a bid to change the S.C. Department of Insurance director’s office to an elected position from an appointed post, one of the lawmakers involved in that effort is back at it.

Sen. Luke Rankin, R-Horry, earlier this month introduced S. 1124, which would require that the head of the state Department of Insurance be elected by voters rather than appointed by the governor.

Rankin and fellow Grand Strand lawmakers Sen. Dick Elliott, D-Horry, and Sen. Ray Cleary, R-Georgetown, along with Glenn McConnell, R-Charleston and president pro tempore of the Senate; Sen. Robert Ford, D-Charleston; and Sen. Jake Knotts, R-Lexington; sponsored a similar bill in 2007.

Rankin could not be reached for comment on his bill.

In an opinion piece that appeared in the Myrtle Beach Sun News nearly five years ago, he wrote that making the state’s top insurance post an elected position would force that official to be more responsive to the citizens of the state.

“Sen. Dick Elliott and I have proposed many reforms, including that the position of director of the Insurance Department be elected by the people, rather than appointed,” Rankin wrote back on April 29, 2007. “We, along with many others, feel an elected insurance director will be more accountable to the people.”

Just 12 states have elected insurance directors, including Georgia, North Carolina, Mississippi and Louisiana, according to Bob Hartwig, president of the Insurance Information Institute in New York.

Florida elected its insurance director until 2003, when that state’s law was changed and the top insurance official began reporting to the state’s chief financial officer.

In 2010, a bill before the Georgia Senate sought to make that state’s insurance commissioner appointed rather than elected. It made it through a second reading in the state Senate before the session ended, but no further.

By and large the insurance industry itself doesn’t have an opinion either way, as long as the position doesn’t become politicized, said Hartwig.

“The position is charged with creating an environment where consumers can be confident regarding the insurers operating in that state, and politics and insurance just don’t work,” he said. “That has been proven time and time again, particularly in Florida.”

Hartwig said an elected commissioner rather than an appointed one would not necessarily result in more politicization because of the possibility of candidates catering to voters.

Hartwig compared what took place in Louisiana, which has an elected commissioner, with Florida and its appointed commissioner following heavy insurance losses a little less than a decade ago.

Despite devastation wrought by Hurricane Katrina in 2005, the Louisiana insurance market has been more stable and recovered more quickly than in Florida, which suffered through a series of storms in 2004 and 2005.

“In the wake of those storms and record insured losses, Charlie Crist became a candidate for governor (in Florida) and as part of his campaign platform promised that rates wouldn’t rise and, in fact, would go down,” Hartwig said. “Politics ruled and the insurance market, predictably, fell apart – with the state itself becoming by far the largest insurer of homes and condos.

“In Florida they’ve had hurricanes with elected commissioners, and they’ve had hurricanes with appointed commissioners – as far as I know, neither has stopped the hurricanes,” he added.

Five years ago, legislative attempts to make the South Carolina insurance director’s position an elected one were driven by rising homeowners’ insurance costs along the coast.

Many insurance companies boosted coverage costs sharply or dumped policies along the coast, and thousands of property owners found themselves uninsured or struggling to pay premiums in areas prone to hurricanes.

The 2007 bill that Rankin was involved with was referred to the Senate Judiciary Committee in January 2007 and received a favorable committee report with an amendment that April.

It sat idle until the following March, the second year of the two-year session, when the committee amendment was adopted, but then died in committee. In addition, a similar House bill also died in committee.

The legislation was also seen as a slap at then-Gov. Mark Sanford, the two-term chief executive whose priorities included putting more state offices under the control of the governor’s office but who was perceived as not having done enough to help coastal homeowners with spiraling insurance costs.

“The Senate’s moving in the exact opposite direction it needs to be going in regards to restructuring,” Sanford spokesman Joel Sawyer said at the time.

Sawyer said then that the post was accountable because it was in the Cabinet.

Gov. Nikki Haley’s office did not return calls from The Nerve seeking comment on Rankin’s latest bill regarding the chief of the department of insurance.

Under Rankin’s bill, the title of the state’s top insurance official would be changed from director of insurance to commissioner of insurance.

The commissioner and any candidate running for the office would be prohibited from accepting campaign contributions or anything of value, directly or indirectly, from insurance companies regulated by the S.C. Department of Insurance, their subsidiaries, or from insurance agents or any other insurance professionals.

Limiting campaign contributions from a specific line of business, even an industry that would be regulated by the individuals running to oversee that industry, would appear to raise questions regarding freedom of speech.

But the bill does not include a severability clause, which would enable a court to strike down part or parts of the legislation if they were deemed unconstitutional after the bill became law, rather than having to declare the entire act unconstitutional.

If the bill were to become law this session, the election of an insurance commissioner would begin with the 2014 statewide election.

Reach Dietrich at (803) 779-5022 ext. 110, or kevin@thenerve.org.