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New Consumer Group Takes On Insurance Industry

by Broderick Perkins

In it's first official act, the new Americans for Insurance Reform (AIR) is asking insurance commissioners in 50 states to help end insurance industry price-gouging and institute new regulatory reforms.

AIR is a coalition of state and national groups including the Consumer Federation of America, the National Women's Health Network, U.S. PIRG, USAction, the Center for Justice & Democracy, and state organizations from 24 states including Florida, Texas, New York, California, New Jersey, West Virginia and Ohio.

The new group says the insurance industry is an ENRON-like behemoth of financial mismanagement that's costing the insured more than they should pay to live safe and healthy lives.

In the last 30 years, the insurance industry thrice has claimed liability insurance "crises" that rendered insurance unaffordable or unavailable at any price for many businesses, professions, home owners and others.

Insurance woes have hit home owners particularly hard in many states as insurers have curtailed covering water-related claims after multi-million dollar judgments against the industry in mold-related suits. In many states, insurers have withdrawn from the home owner insurance market. When insurers do offer policies they often don't cover water damage claims on policies without special coverage a exorbitantly high premiums. In other cases, insurers fail to renew policies if a home owner has too many water-related claims. In still other cases, home buyers can't get coverage on a home they are about to purchase because of previous claims against the home made by the former owner.

Since 9-ll, terrorism insurance has all but disappeared for commercial real estate.

"We are appalled that insurers -- whose own actions have created a 'crisis' in insurance affordability and availability for everyone from doctors and trauma centers to homeowners and motorists -- are blaming others for their own mismanagement," AIR wrote to the commissioners.

AIR's letter asks state insurance commissioners to undertake 14 specific investigations , including:

An immediate freeze on medical malpractice and homeowner rates.

A full investigation of the high profitability of the insurance industry during much of the 1990s, and the extent to which today's rate increases are an attempt to recoup money that insurers lost in the stock market or in other poorly-performing assets.

Annual audits to determine whether companies are engaging in questionable accounting practices and whether their business and investment practices present unacceptable financial risks for insurance consumers and shareholders.

Regulation of the excessive prices being charged by insurers.

Communication to state legislators that the solution to prevent shock rate increases such as those we are now experiencing is insurance reform, not restrictions on people's right to be compensated fully for their claims.

The new group also specifically asks for reforms, including.

Meaningful Insurance Disclosure Laws. New laws should give public officials information on insurance claim payouts, losses, income and reserves to determine the true condition of the insurance industry. Congress should also set minimum disclosure standards for surplus lines and reinsurers operating in the United States.

Effective State Rate Authorities and Insurance Consumer Advocates. State insurance departments must take a more active role in approving and rejecting rate requests and in advocating rolling back insurance rates. States also should establish a consumer advocate in the Insurance Commissioner's office to participate in rate hearings and to monitor insurance industry waste, inefficiencies and price-gouging.

Repeal Insurance Industry's Anti-Trust Exemptions. Federal law should repeal the insurance industry's federal anti-trust exemption, the McCarran-Ferguson Act. The repeal should ensure that all domestic and foreign insurers and reinsurers that do business in the United States are subject to federal anti-trust prohibitions applicable to other industries. States should repeal anti-group laws, as well as anti-rebate laws prohibiting insurance agents from offering discounts to policyholders.

"In view of the excessive rate increases and tight underwriting that have hit certain lines of insurance this year, including the home owners and medical malpractice lines, and recent reports about the questionable business and accounting practices of some insurers, Americans for Insurance Reform believes it is imperative that insurance regulators take immediate steps to impose a new regime of corporate responsibility and accountability on this industry whose business practices are wreaking havoc on the American economy," AIR wrote.

Not to mention wreaking havoc on the American Dream for many home owners and buyers.

Published: August 7, 2002

Use of this article without permission is a violation of federal copyright laws.

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home.

The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services.

The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home.

Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News.

Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake.

He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications.

In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.

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