| "Prediction is very hard, especially when it's about | | | | scrutiny not less has been called for.But |
| the future." Yogi BerraGiven the focus on the | | | | deregulation has also brought about insurance |
| recent one-year anniversary of Hurricane Katrina | | | | products sold worldwide as investments and |
| by the media and government officials and its | | | | annuities and reinsurance companies which provide |
| label as the most costly catastrophic disaster in | | | | catastrophic coverage for domestic insurers |
| United States history, there has been little focus | | | | primarily are located overseas. Therefore, in a |
| on the nationwide impact the property and | | | | global economy, federal oversight is far more |
| casualty insurance industry has started to impart | | | | necessary than in the past. Leaving global |
| on homeowners and businesses in a post-Katrina | | | | oversight up to state regulators is arguably |
| world.There has been serious discussion about | | | | negligent given the ramifications of lack of |
| reforming U.S. insurance laws in the U.S. Congress | | | | coverage during a catastrophe.The insurance |
| since 2004, before four hurricanes battered the | | | | industry itself has been campaigning for some |
| Florida coast and well before the Katrina and Rita | | | | type of legislative reform to provide for a federal |
| storms hit the Gulf Coast in 2005. However, the | | | | catastrophic fund which would subsidize insurers in |
| insurance industry since Katrina is now not only | | | | cases of terrorism and natural catastrophes. The |
| fighting hundreds of individual and class action | | | | American 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 the | | | | Emergency Management Agency (FEMA) has |
| event of future catastrophic events.The | | | | been 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 insurance | | | | Orleans for rebuilding costs, with FEMA's National |
| regulations to the states, where it was believed | | | | Flood Insurance Program (NFIP) to homeowners |
| better oversight would take place rather than | | | | and businesses and for FEMA housing costs for |
| federal government mechanisms. However, state | | | | the displaced.But an unexpected phenomenon |
| regulators are not law enforcement agencies and | | | | followed the 2005 hurricane season and is |
| do not have the benefit of the arm of the federal | | | | primarily fueling the fires for insurance reform and |
| government in cases which are beyond their | | | | that is the record high premium rate hikes on |
| means. Now, many state insurance | | | | homeowners as well as commercial property |
| commissioners, members of the Congress as well | | | | policies. In addition, hundreds of thousands of |
| as consumer advocacy agencies believe that the | | | | policies are being dropped and non-renewed by |
| whittling away of consumer protections over the | | | | the country's two largest insurance companies, |
| years and recent staggering premium hikes, with | | | | namely State Farm Insurance Co. and Allstate |
| little public disclosure, builds a case for federal | | | | Insurance Co., from the Gulf Coast all the way up |
| insurance legislation and industry reforms.Since | | | | to the tip of Maine.Even more unexpected, |
| 1945 the insurance industry has enjoyed an | | | | however, were renewal denials for inland |
| antitrust exemption and the viability of that rule | | | | properties for policyholders in the Northeast |
| has been seriously discussed and revisited by the | | | | including New York City, where property owners |
| Congress. There have been state accusations of | | | | have never even previously filed a claim for |
| price fixing and price gouging along with collusion in | | | | property damage. With premiums on the Gulf |
| the industry leaving consumers with little | | | | Coast having at least doubled since 2005, |
| information about their homeowners and business | | | | thousands of dollars have been added to |
| property policies, with only the civil or criminal | | | | mortgage loans. In some cases, many |
| courts left for recourse. It is argued that the | | | | homeowners policies were not renewed at all, |
| antitrust exemption only fuels such a scenario.The | | | | preventing homeowners from obtaining |
| proposed National Insurance Act of 2006 (S.B. | | | | mortgages or rebuilding at all.With insurers' |
| 5209) introduced by the Senate Banking | | | | withdrawal from writing homeowners policies |
| Committee on July 11, 2006, would allow insurers | | | | throughout regions of the U.S. and gutting those |
| to be licensed under a federal umbrella license, to | | | | with less and less coverage for those in place, the |
| choose between federal or state regulation and to | | | | industry believes it will be able to stay healthy. |
| do business in any state without need of state | | | | Astonishingly, 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 such | | | | 2004 it realized a profit of $38 billion.The models |
| national insurers. Arguments against such an | | | | associated with risk management amongst |
| arrangement cite more endless bureaucracy and | | | | insurers are also changing. The 100-year average |
| red tape with fears that individual states would | | | | of history for forecasting future hurricanes, for |
| not be equally treated.Alternatively, the State | | | | example, is presently being revised. And as those |
| Modernization and Regulatory Transparency | | | | methods of calculations become murkier, |
| (SMART) Act introduced in 2004 addresses | | | | homeowners can hardly feel safe or comfortable |
| market conduct, licensing and antifraud data | | | | when purchasing new properties. There are also |
| exchanges but has failed numerous times to | | | | several states which only allow for the issuance |
| move through the legislative process. It would | | | | of property insurance based solely upon a |
| leave regulation up to the states but to comply | | | | consumer'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 regulatory | | | | consumer to be able to purchase insurance.Over |
| framework of the insurance industry has become | | | | the next year, 43% of the U.S. population which |
| synonymous with deregulation and appears that | | | | covers 18 states can expect their policies to |
| resistance on both sides of the argument makes | | | | either be dropped by their insurance carriers or |
| reform more and more insurmountable along with | | | | have their premiums escalate between 20% and |
| immense struggles to provide sufficient delivery | | | | 100%. And for that reason alone it might be time |
| of adequate insurance for property owners.The | | | | to reel in an industry which not only is in business |
| repeal of the McCarran-Ferguson Act has also | | | | to make a profit, but also has a moral obligation |
| caught the attention of the Senate Judiciary | | | | to help protect communities nationwide and such |
| Committee which held a hearing on the issue on | | | | becomes 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 and | | | | Contact: Diane M. Grassi is a freelance columnist, |
| less public disclosure of information and devices | | | | reporting and writing commentary on current |
| used for premium calculations. Such has impeded | | | | events of the day providing honest and often |
| consumers from making a proper decision when | | | | politically incorrect assessments. From U.S. public |
| purchasing policies. Travis Plunkett of the | | | | policy to Major League Baseball, she is an eclectic |
| Consumer Federation of America (CFA) testified | | | | thinker, and demanding of her readers to reflect |
| that "Insurers want competition alone to | | | | on their own thinking patterns from an alternative |
| determine rates, they say. How about a repeal of | | | | perspective. Whether you agree with her or not, |
| the McCarran-Ferguson Act to test their desire to | | | | Diane M. Grassi will have you coming back to note |
| compete under the same rules as normal | | | | her opinions, and if at best she wakes you up, |
| American businesses?"The CFA has also called for | | | | then her goal will have been accomplished.Ms. |
| regulation to ensure consumers have availability of | | | | Grassi is featured with the online publications: New |
| enough information in order to compare pricing of | | | | Media Journal.us; American Chronicle; Mich |
| policies between insurers in order to make | | | | News.com; Opinions Editorials; the Conservative |
| informed decisions. Unlike the way most | | | | Voice; 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-finite | | | | regular columns on Major League Baseball where |
| uncertain condition to happen some time in the | | | | she is a featured online columnist with The |
| future. And consumers must rely solely upon the | | | | Diamond Angle Baseball Ezine and |
| agent, especially when actuarial tables and | | | | Sports-Central.org. Ms. |
| insurance models are non-accessible. Thus, more | | | | |