December 15, 2011
NEW STUDY: INSURANCE INDUSTRY CREATES
INSURANCE CRISES HARMING THEIR POLICYHOLDERS
Consumer Group Calls on Federal and State Officials to Take Immediate Steps
to Prevent a New Crisis, Which the Industry Has Already Instigated
Americans for Insurance Reform (AIR), a coalition of nearly 100 consumer and public interest groups representing more than 50 million people, has produced a major new study called “Repeat Offenders: How The Insurance Industry Manufactures Crises And Harms America.” The study exposes how the property/casualty insurance industry creates periodic crises where insurance becomes unaffordable or unavailable for everyone from doctors to small businesses to local governments. These crises are known as “hard markets.”
Written by J. Robert Hunter and Joanne Doroshow, Repeat Offenders finds that in the last few months, industry executives have been pushing the industry, including pressuring their own competitors, to start raising rates again for businesses and professionals, setting the stage for a new liability insurance crisis in America.
“We have asked insurance regulators to stop earlier crises but they have balked and not acted. This time, they must act to stop unwarranted price gouging,” said Hunter.
Repeat Offenders finds that hard markets, when premiums suddenly skyrocket as they have done three times in the past 35 years, are caused by “a combination of the industry’s own boom and bust economic cycle, anti-competitive (yet legal) underwriting practices, unique and opaque accounting policies, and virtually unchecked power when it comes to regulation of insurance rates.” Moreover, say the authors, “while the existence of this self-made cycle is clear to insurance industry insiders, insurers often publicly deny the cycle’s existence while their lobbyists try to take advantage of skyrocketing rates to push for so-called ‘tort reform.’” However, they say, “these cycles are national in scope and occur in every state irrespective of a state’s ‘tort’ law. Because the legal system is not responsible for creating hard markets, enactment of so-called ‘tort reform’ has done nothing to prevent them.” The authors quote numerous insurance insiders freely discussing this cycle and never referencing lawsuits or tort system costs as a cause for rate hikes.
Co-author Joanne Doroshow said, “Businesses in this country have paid and will continue to pay dearly for this industry’s mismanagement and lack of unaccountability. Insurance executives get away with pointing their fingers everywhere but at their own actions. This country has had enough of the insurance industry blame game and the endless cycle and the periodic crises that accompany it. Remedies that do not specifically address the insurance industry’s practices will fail to stop these volcanic price jumps, which are threatening the country once again.”
Repeat Offenders also finds that:
Doroshow said that the group is sending the report to all 50 state insurance commissioners, the new Federal Insurance Office and key members of Congress, hoping for urgent action. AIR is asking for:
A full copy of the report can be found here.
 Hunter is Director of Insurance for the Consumer Federation of America, former Texas Insurance Commissioner and Federal Insurance Administrator. Doroshow is Executive Director of the Center for Justice & Democracy at New York Law School.