Are insurancecompanies fleecingAmericantaxpayers?
Consumer Group Says “Terrorism Insurance” For Insurers UnnecessaryBy Cliff Montgomery – Jan. 16th, 2007On Jan. 8th, the Consumer Federation of America (CFA) issued a study showing that property-and-casualty insurers enjoyed a record profit of almost $60 billion in 2006. The consumer group says that with such a windfall, lawmakers have little need to enact industry calls for a federal backstop for terrorism risk insurance and natural disasters.The CFA said that within the last decade the industry has suffered losses only as a result of the Sept. 11th, 2001, terrorist attacks. Robert Hunter, director of insurance for the group, argues that payouts for claims continue to drop and that the industry is in fact overcapitalized–an excess which forces some insurers to engage in stock buybacks.Hunter recently told CongressDaily in an interview that of course profits themselves aren’t a problem, “but unjustified profits and excessive capitalization harm consumers.””Unfortunately, a major reason why insurers have reported record high profits and low losses in recent years is that they have been methodically overcharging consumers, cutting back on coverage, underpaying claims, and [even] getting taxpayers to pick up some of the tab for higher risks,” he added.Such insurance issues are sure to be a focal point as a much more liberal Congress considers reauthorization of the federal government‘s terrorism risk-insurance programs.In fact, both sides of Congress are beginning to ask the industry tough questions. Senate Minority Whip Trent Lott, (R-MS), and Rep. Gene Taylor (D-MS), have sued State Farm, alleging that the company wrongly denied wind damage claims from Hurricane Katrina by registering them as water damage claims to be covered under the taxpayer-funded National Flood Insurance Program.CFA supports what it says is a more reasonable extension of terrorism risk-insurance: backstops only for proven nuclear, chemical and biological attacks.”This law is getting in the way for building private capacity for terrorism coverage,” Travis Plunkett, legislative director for the group, told CongressDaily.The CFA also opposes a proposal by Allstate and State Farm to create a federal reinsurance fund for natural disasters in the wake of the 2005 hurricane season, which resulted in $80 billion in insurance losses.Another words, the insurance companies wish to take our money without directly doing anything to earn it.Of course the Insurance Information Institute, an industry-supported group, is keen on such legislation. To sweeten a pot going bad, it has added a claim that 93 percent of insurers’ massive profits from 2006 would be set aside as a reserve for future claims.Marc Racicot, president of the American Insurance Association, has added that home and auto insurance rates are falling across the country, but not for coastal property insurance, another major concern to lawmakers.”This makes sense, given that insurance rates are set according to the risk of loss in each state,” Racicot told CongressDaily.Yet this was never the issue: no one is arguing the insurers’ right to rate risk. The issue is instead why an industry enjoying an all-round windfall of record profits and low losses in recent years is simultaneously “overcharging consumers, cutting back on coverage, underpaying claims, and [even] getting taxpayers to pick up some of the tab for higher risks.”It’s a situation that simply doesn’t pass the smell test.
