Higher insurance costs vex businesses

Some places see rates nearly triple

By Jenny Burns

The Sun News

Skyrocketing insurance premiums are taking their toll on Grand Strand businesses.

At the three-tower Poindexter oceanfront hotel, rates have nearly tripled, from $80,000 to $205,000 a year.

Insurance rates at the 514-room Crown Reef Resort are doubling. And Broadway at the Beach store owners are seeing 40 to 50 percent increases.

"It's terrible," said Dorothy Anderson, owner of the Poindexter. "It's not just me; it's everyone. We had no idea that we would be hit with such rate increases. It's all over the beach."

The effect could be devastating.

Bottom lines will be squeezed and rates next year for such tourist necessities as meals and hotel rooms could be higher as businesses try to recoup their losses.

The Myrtle Beach Area Chamber of Commerce and the Council of Myrtle Beach Organizations plan to take the problem to state legislators.

"Our challenge is to identify the impact to the state's largest tourism market. There are no easy solutions. If it's a legislative solution, it will take non-coastal legislators to go along with it," said Brad Dean, president of the Myrtle Beach Area Chamber of Commerce.

Problems on the bottom line

Woody Crosby, president of Jordan Properties, owner of Crown Reef, spent several months searching for insurance. When he finally found it, his premiums doubled. He is worried about the effect on other local business owners.

"If it continues right now, it comes right off our bottom line. It could mean the difference to many businesses if they make a profit or not," he said.

Hotels can't pass the increases on to customers because room rates are set for the summer.

But, eventually, Anderson said, her business and others on the Grand Strand - from restaurants to retailers - will have to pass those increases on.

And if the rate increases and difficulty in getting coastal insurance doesn't let up, local business owners are worried it could mean disaster for the Strand economy.

"Complications from the wind pool and post-Katrina cost recovery is clobbering our local industry, and there's no sign of letting up. Properties on the oceanfront are seeing rates triple almost overnight and their business model simply can't support that," Dean said, The chamber is surveying its members to find out what kind of rate increases they've seen. They're hoping to measure the effect and have some solid numbers to show legislators. They also want to gauge whether the main problem is rising rates or the lack of available policies.

Hurricane Katrina sent gas prices soaring and sparked a shortage at Strand pumps after it hit in September.

Almost a year later - the storm is being felt in skyrocketing insurance premiums as carriers reduce their exposure in coastal areas.

Businesses are finding it's harder to get coverage, and when they do find it, it's a lot more expensive. "I feel like we are having to pay for the loss on the Gulf Coast which isn't fair," Anderson said.

Katrina cost insurers $40.6 billion last year in claims, and now those insurers are cutting the number of policies they're writing to be sure they can cover the claims of current customers.

They also fear the future. Forecasts call for increasing numbers of devastating storms over the next 10 to 20 years.

Cutting back to get by

Some Strand businesses that can't absorb the extra cost are reducing or eliminating insurance, Dean said.

For those that can get insurance, deductibles are rising and insurers are adding percentage deductibles to shift more of the cost of the claim on the premium holder.

Scott Harrelson, landlord for Thoroughbreds Restaurant and Sam Snead's Grille, said both properties had seen about a 40 percent increase in insurance premiums.

Even though his long-time insurance company renewed the policy this year, Harrelson is worried he won't be able to get insurance next year. And he's concerned that rate increases could put some people out of business.

Lee Ann Johnston, one of the partners in two Myrtle Beach-area Fuddruckers, is waiting anxiously to hear what kind of increase her insurance agent is going to quote.

The insurance for both Fuddruckers is up for renewal Aug. 1, and she's expecting at least a 50 percent increase.

"If South Carolina wants tourism, then they've got to make it affordable for businesses to operate," Johnston said.

She's not sure how the increase will affect her business.

"We can only charge so much for burgers. You've got to have more sales or you are really going to take a hit on the income," she said.

Wind pool proposition

It's not just beachfront properties that are getting hit with higher premiums.

Both Fuddruckers - in Myrtle Beach and Briarcliffe Acres - sit on the west side of U.S. 17 Business, an area dubbed by independent insurance agents as "No man's land."

That's an area between U.S. 17 Business and the Intracoastal Waterway where few insurers are writing wind policies.

East of U.S. 17 Business, businesses are eligible to buy wind insurance from the wind pool - a group of insurers set up by the state to offer wind coverage to coastal property owners who can't get it through the standard market.

There's where Johnston is running into problems. She said she can find insurers who will write a policy, but they won't write wind coverage.

About 90 percent of independent insurance agents in Horry and Georgetown counties are in favor of moving the wind pool line inland to the Intracoastal Waterway.

Dean said the chamber backs the insurance industry position to move the line.

That's an option that is under consideration, said Smitty Harrison, executive director of the S.C. Wind and Hail Underwriting Association. Harrison said the line may be moved by fall.

The director of the S.C. Department of Insurance, Eleanor Kitzman, can move the line in an emergency.

Some officials in other coastal states are already taking action.

In Mississippi, Gov. Haley Barbour allocated $50 million in federal aid to that state's wind pool to help offset a deficit that has threatened to force premium increases of nearly 400 percent on about 16,000 policyholders. Wind pool customers in Mississippi will see about a 100 percent increase in rates.

Earlier this summer, Florida Gov. Jeb Bush approved a $715 million bailout of Citizens Property Insurance Corp. and expanded what the state's insurer of last resort can cover. Dean isn't sure what the solution is in South Carolina, but he says legislators need to be proactive in protecting business on the S.C. coast.

"There's nothing worse than fighting problems that you don't know how to solve. This is quickly becoming a national issue that's hitting home. We're hearing about other coastal areas where rates are rising, but nobody seems to see many solutions."

Wire services contributed to this report.