Subcommittee reviews bill to curb insurance fraud, expand mitigation incentives and codify interagency fraud partnership

The House Banking and Insurance subcommittee on Tuesday heard testimony on bill 48-17, the Insurance Rate Reduction, Policyholder Protection Act, which sponsors say is designed to lower homeowners and personal auto insurance costs by reducing fraud, encouraging mitigation and recruiting stable insurance carriers to the state. "Nobody can guarantee that rates will go down," said Michael Wise, director of the South Carolina Department of Insurance, "but these are things that can help put downward pressure on rates through reducing claim frequency and claim severity."

The measure would codify an existing memorandum of understanding that places prosecutors and SLED agents in close coordination with DOI's insurance experts, a step DOI officials called important to stabilizing fraud investigations and prosecutions. "We have prosecutors and the agents in our office, across the street, and it's great to have them all together in one spot," Wise said, describing the current operational arrangement that originated in a 2021 MOU. Deputy Attorney General Matt Gates told the committee the arrangement "has been working well" and said his office will work with staff on technical tweaks to the bill.

DOI and its insurance-fraud chief emphasized adding tools to pursue organized staged-accident schemes, which they said drive up claims costs and risk public safety. "Staged automobile accidents or staged collisions are a huge problem in South Carolina," said Josh Underwood, director of the Insurance Fraud Division, citing prosecutions of multi-person rings and describing both the safety and fiscal risks of those schemes. Underwood urged the committee to consider new criminal language to treat staging as a standalone offense, to add attempted offenses to certain misrepresentation statutes so unsuccessful fraud attempts are prosecutable, and to expand the ability to send complex matters to the state grand jury for subpoenas and financial-document discovery.

The bill would also shift some roofing-related investigations toward DOI's fraud unit from boards at the Department of Labor, Licensing and Regulation (LLR), a transfer LLR staff did not oppose but said needs clearer referral and disciplinary language. "The boards nor the agency have a policy position on this bill," LLR representative Virginia Wetzel told the panel, and she asked that referral rules and which boards would handle returned disciplinary matters be clarified before enactment.

On mitigation and consumer incentives, DOI described changes to the South Carolina Safe Home mitigation grant program and other incentives intended to reduce claim frequency and severity. Wise noted that the statute currently caps mitigation grants at $7,500 and said the bill would remove that cap so administrators can adjust awards as costs and funding change: "The maximum grant amount is $7,500 via statute. We would like to take that sort of thing out of statute so that we can change it over time based on funding," he said. The proposal also would allow post-disaster mitigation grants, authorize actuarially justified discounts tied to building codes and IBHS fortified standards, and create or raise certain hurricane-resilience tax credits and premium tax credits.

Department witnesses described operational numbers for the fraud effort: DOI receives roughly 5,000 referrals a year into the fraud pipeline, currently has seven or eight SLED investigators colocated with DOI staff, and operates with four prosecutors designated as Special Assistant Attorneys General who prosecute statewide; DOI said it is requesting funding in the next budget cycle for 10 additional investigators and six to seven additional prosecutorial staff as part of a multi-phase staffing plan. Underwood estimated prosecution-stage caseloads exceed 100 and are "probably slightly over 200" at times.

Committee members asked technical questions about jurisdictional assignments, funding for colocated SLED agents and how criminal penalties are scaled; representatives said they will work with agency staff to tighten implementation language. The Attorney General's Office and SLED representatives signaled support for codifying the interagency arrangement.

No formal action was taken on bill 48-17 at the hearing; the committee adjourned on a voice vote after wrapping testimony and technical questions. The committee indicated staff would incorporate clarifying language on referral pathways and disciplinary authority in follow-up drafting.