Insurers aren’t the Enemy
By Robert Warne - December 11, 2001Stop crying wolf about premium increases is one way to describe remarks made by the Alliance of American Insurers (AAI) to the Consumer Federation of America (CFA).
The sky isn’t falling, or as CFA would put it, “the rates aren’t falling either.”
An exchange of opinions occurred after CFA accused the insurance industry of using current market conditions caused by the 9/11 terrorist attacks in their favor.
This isn’t a time to ease up on regulations—particularly on rate hikes—urged CFA in a press release to State Insurance Commissioners Dec. 5. Calling the current market condition a “feeding frenzy,” Robert Hunter CFA’s directory of insurance said, “You would think that state regulators would be trying to figure out how to strengthen their ability to reject unwarranted rate increases and attempts to eliminate terrorism coverage.” “Instead they are considering how to reduce their ability to protect consumers and small business at this time of great uncertainty.”
Hunter doesn’t want insurers to have their cake and eat it too. He doesn’t want insurers to profit from large rate increases and also enjoy the reduced risk of having a federal safety net. “It would be politically embarrassing for Congress to put the taxpayer on the hook for the losses from terrorism while the insurers hike prices beyond reason.”
Alliance Promptly responded with its position that the most important issue at hand is to ensure the continued availability of insurance, not price restrictions.
David Farmer, Alliance senior vice president of federal affairs said, “Prices are a function of many factors. The focus of the current debate should be on availability, i.e., backstopping insurers so they can continue to offer coverage and maintain one of the key underpinnings of our economy—the risk transference mechanism.”
He said, even “Wall Street analysts, Administration officials, Congressional leaders and even consumer groups recognize the need for government action.”
“Insurers are meeting their obligations to their current and future customers and are doing so in an appropriate way, ensuring that they have the resources to meet future obligations. Any analysis of the insurance industry will show that under the current state regulatory system, competitive markets have created the lowest prices and broadest choices for America’s businesses and consumers,” said Farmer.
A related issue closer to home, the Foundation for Taxpayer and Consumer Rights in Santa Monica, CA recently asked Insurance Commissioner Harry Low to stop approving insurance rate hikes. The group is calling for a moratorium—citing the possibility of artificially inflated rates due to the recent market turmoil.
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