Post-Katrina Role Of Property Insurers Threaten Consumers Nationwide

"Prediction is very hard, especially when it's aboutscrutiny not less has been called for.But
the future." Yogi BerraGiven the focus on thederegulation has also brought about insurance
recent one-year anniversary of Hurricane Katrinaproducts sold worldwide as investments and
by the media and government officials and itsannuities and reinsurance companies which provide
label as the most costly catastrophic disaster incatastrophic coverage for domestic insurers
United States history, there has been little focusprimarily are located overseas. Therefore, in a
on the nationwide impact the property andglobal economy, federal oversight is far more
casualty insurance industry has started to impartnecessary than in the past. Leaving global
on homeowners and businesses in a post-Katrinaoversight up to state regulators is arguably
world.There has been serious discussion aboutnegligent given the ramifications of lack of
reforming U.S. insurance laws in the U.S. Congresscoverage during a catastrophe.The insurance
since 2004, before four hurricanes battered theindustry itself has been campaigning for some
Florida coast and well before the Katrina and Ritatype of legislative reform to provide for a federal
storms hit the Gulf Coast in 2005. However, thecatastrophic fund which would subsidize insurers in
insurance industry since Katrina is now not onlycases of terrorism and natural catastrophes. The
fighting hundreds of individual and class actionAmerican taxpayer and consumer have gotten
lawsuits in Mississippi and Louisiana in the wind v.their fill of that, however, where the Federal
water debate, but also advocating change in theEmergency Management Agency (FEMA) has
event of future catastrophic events.Thebeen and continues to pay out damages to the
McCarran-Ferguson Act, enacted in 1945,Gulf Coast states and primarily the City of New
delegated sole enforcement of insuranceOrleans for rebuilding costs, with FEMA's National
regulations to the states, where it was believedFlood Insurance Program (NFIP) to homeowners
better oversight would take place rather thanand businesses and for FEMA housing costs for
federal government mechanisms. However, statethe displaced.But an unexpected phenomenon
regulators are not law enforcement agencies andfollowed the 2005 hurricane season and is
do not have the benefit of the arm of the federalprimarily fueling the fires for insurance reform and
government in cases which are beyond theirthat is the record high premium rate hikes on
means. Now, many state insurancehomeowners as well as commercial property
commissioners, members of the Congress as wellpolicies. In addition, hundreds of thousands of
as consumer advocacy agencies believe that thepolicies are being dropped and non-renewed by
whittling away of consumer protections over thethe country's two largest insurance companies,
years and recent staggering premium hikes, withnamely State Farm Insurance Co. and Allstate
little public disclosure, builds a case for federalInsurance Co., from the Gulf Coast all the way up
insurance legislation and industry reforms.Sinceto the tip of Maine.Even more unexpected,
1945 the insurance industry has enjoyed anhowever, were renewal denials for inland
antitrust exemption and the viability of that ruleproperties for policyholders in the Northeast
has been seriously discussed and revisited by theincluding New York City, where property owners
Congress. There have been state accusations ofhave never even previously filed a claim for
price fixing and price gouging along with collusion inproperty damage. With premiums on the Gulf
the industry leaving consumers with littleCoast having at least doubled since 2005,
information about their homeowners and businessthousands of dollars have been added to
property policies, with only the civil or criminalmortgage loans. In some cases, many
courts left for recourse. It is argued that thehomeowners policies were not renewed at all,
antitrust exemption only fuels such a scenario.Thepreventing homeowners from obtaining
proposed National Insurance Act of 2006 (S.B.mortgages or rebuilding at all.With insurers'
5209) introduced by the Senate Bankingwithdrawal from writing homeowners policies
Committee on July 11, 2006, would allow insurersthroughout regions of the U.S. and gutting those
to be licensed under a federal umbrella license, towith less and less coverage for those in place, the
choose between federal or state regulation and toindustry believes it will be able to stay healthy.
do business in any state without need of stateAstonishingly, in 2005 it made a record profit of
licenses. The U.S. Department of the Treasury$45 billion post-Katrina and after four storms in
would then have jurisdiction to regulate such2004 it realized a profit of $38 billion.The models
national insurers. Arguments against such anassociated with risk management amongst
arrangement cite more endless bureaucracy andinsurers are also changing. The 100-year average
red tape with fears that individual states wouldof history for forecasting future hurricanes, for
not be equally treated.Alternatively, the Stateexample, is presently being revised. And as those
Modernization and Regulatory Transparencymethods of calculations become murkier,
(SMART) Act introduced in 2004 addresseshomeowners can hardly feel safe or comfortable
market conduct, licensing and antifraud datawhen purchasing new properties. There are also
exchanges but has failed numerous times toseveral states which only allow for the issuance
move through the legislative process. It wouldof property insurance based solely upon a
leave regulation up to the states but to complyconsumer's credit history and income which
with uniform standards without federal oversight.makes it far more difficult for the working class
The attempt to "modernize" the regulatoryconsumer to be able to purchase insurance.Over
framework of the insurance industry has becomethe next year, 43% of the U.S. population which
synonymous with deregulation and appears thatcovers 18 states can expect their policies to
resistance on both sides of the argument makeseither be dropped by their insurance carriers or
reform more and more insurmountable along withhave their premiums escalate between 20% and
immense struggles to provide sufficient delivery100%. And for that reason alone it might be time
of adequate insurance for property owners.Theto reel in an industry which not only is in business
repeal of the McCarran-Ferguson Act has alsoto make a profit, but also has a moral obligation
caught the attention of the Senate Judiciaryto help protect communities nationwide and such
Committee which held a hearing on the issue onbecomes necessary in the face of absolute
June 27, 2006 for the first time since 1994,destruction.Copyright ©2006 Diane M. Grassi
precipitated by numerous complaints of less andContact: Diane M. Grassi is a freelance columnist,
less public disclosure of information and devicesreporting and writing commentary on current
used for premium calculations. Such has impededevents of the day providing honest and often
consumers from making a proper decision whenpolitically incorrect assessments. From U.S. public
purchasing policies. Travis Plunkett of thepolicy to Major League Baseball, she is an eclectic
Consumer Federation of America (CFA) testifiedthinker, and demanding of her readers to reflect
that "Insurers want competition alone toon their own thinking patterns from an alternative
determine rates, they say. How about a repeal ofperspective. Whether you agree with her or not,
the McCarran-Ferguson Act to test their desire toDiane M. Grassi will have you coming back to note
compete under the same rules as normalher opinions, and if at best she wakes you up,
American businesses?"The CFA has also called forthen her goal will have been accomplished.Ms.
regulation to ensure consumers have availability ofGrassi is featured with the online publications: New
enough information in order to compare pricing ofMedia Journal.us; American Chronicle; Mich
policies between insurers in order to makeNews.com; Opinions Editorials; the Conservative
informed decisions. Unlike the way mostVoice; Renew America .us; Liberty Watch
consumer service products are purchased,Magazine as well as many others. She also writes
insurance costs are based upon a non-finiteregular columns on Major League Baseball where
uncertain condition to happen some time in theshe is a featured online columnist with The
future. And consumers must rely solely upon theDiamond Angle Baseball Ezine and
agent, especially when actuarial tables andSports-Central.org. Ms.
insurance models are non-accessible. Thus, more