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Auto Insurance in South Carolina
February 1997


Members of the General Assembly, who were concerned about rising insurance recoupment fees paid by South Carolina motorists, asked us to conduct an audit of the South Carolina Reinsurance Facility. This audit addresses laws, policies, and practices in place since the facility’s creation in 1974.

The reinsurance facility provides insurance for drivers in the residual market. Across the United States, the residual market generally consists of drivers who would have difficulty getting an insurance company to sell them a policy voluntarily, such as inexperienced drivers and those with bad driving records. However, through excessive regulation, South Carolina has greatly expanded the number of drivers in its residual market and has reduced competition among insurance companies.

We found that South Carolina has a large number of policies in its reinsurance facility. Payments for the accidents and injuries caused by drivers in the reinsurance facility are subsidized by drivers who are not in the facility. In addition, management practices of the facility have contributed to its high losses and high recoupment fees. We also found that the highway patrol and local law enforcement agencies have not enforced some state laws intended to deter uninsured drivers.