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Post-Katrina Role Of Property Insurers Threaten Consumers Nationwide

"Prediction is very hard, especially whennon-accessible. Thus, more scrutiny not less
it's about the future." Yogi BerraGiven thehas been called for.But deregulation has also
focus on the recent one-year anniversary ofbrought about insurance products sold
Hurricane Katrina by the media and governmentworldwide as investments and annuities and
officials and its label as the most costlyreinsurance companies which provide
catastrophic disaster in United Statescatastrophic coverage for domestic insurers
history, there has been little focus on theprimarily are located overseas. Therefore, in
nationwide impact the property and casualtya global economy, federal oversight is far
insurance industry has started to impart onmore necessary than in the past. Leaving
homeowners and businesses in a post-Katrinaglobal oversight up to state regulators is
world.There has been serious discussion aboutarguably negligent given the ramifications of
reforming U.S. insurance laws in the U.S.lack of coverage during a catastrophe.The
Congress since 2004, before four hurricanesinsurance industry itself has been
battered the Florida coast and well beforecampaigning for some type of legislative
the Katrina and Rita storms hit the Gulfreform to provide for a federal catastrophic
Coast in 2005. However, the insurancefund which would subsidize insurers in cases
industry since Katrina is now not onlyof terrorism and natural catastrophes. The
fighting hundreds of individual and classAmerican taxpayer and consumer have gotten
action lawsuits in Mississippi and Louisianatheir fill of that, however, where the
in the wind v. water debate, but alsoFederal Emergency Management Agency (FEMA)
advocating change in the event of futurehas been and continues to pay out damages to
catastrophic events.The McCarran-Fergusonthe Gulf Coast states and primarily the City
Act, enacted in 1945, delegated soleof New Orleans for rebuilding costs, with
enforcement of insurance regulations to theFEMA's National Flood Insurance Program
states, where it was believed better(NFIP) to homeowners and businesses and for
oversight would take place rather thanFEMA housing costs for the displaced.But an
federal government mechanisms. However, stateunexpected phenomenon followed the 2005
regulators are not law enforcement agencieshurricane season and is primarily fueling the
and do not have the benefit of the arm of thefires for insurance reform and that is the
federal government in cases which are beyondrecord high premium rate hikes on homeowners
their means. Now, many state insuranceas well as commercial property policies. In
commissioners, members of the Congress asaddition, hundreds of thousands of policies
well as consumer advocacy agencies believeare being dropped and non-renewed by the
that the whittling away of consumercountry's two largest insurance companies,
protections over the years and recentnamely State Farm Insurance Co. and Allstate
staggering premium hikes, with little publicInsurance Co., from the Gulf Coast all the
disclosure, builds a case for federalway up to the tip of Maine.Even more
insurance legislation and industryunexpected, however, were renewal denials for
reforms.Since 1945 the insurance industry hasinland properties for policyholders in the
enjoyed an antitrust exemption and theNortheast including New York City, where
viability of that rule has been seriouslyproperty owners have never even previously
discussed and revisited by the Congress.filed a claim for property damage. With
There have been state accusations of pricepremiums on the Gulf Coast having at least
fixing and price gouging along with collusiondoubled since 2005, thousands of dollars have
in the industry leaving consumers with littlebeen added to mortgage loans. In some cases,
information about their homeowners andmany homeowners policies were not renewed at
business property policies, with only theall, preventing homeowners from obtaining
civil or criminal courts left for recourse.mortgages or rebuilding at all.With insurers'
It is argued that the antitrust exemptionwithdrawal from writing homeowners policies
only fuels such a scenario.The proposedthroughout regions of the U.S. and gutting
National Insurance Act of 2006 (S.B. 5209)those with less and less coverage for those
introduced by the Senate Banking Committee onin place, the industry believes it will be
July 11, 2006, would allow insurers to beable to stay healthy. Astonishingly, in 2005
licensed under a federal umbrella license, toit made a record profit of $45 billion
choose between federal or state regulationpost-Katrina and after four storms in 2004 it
and to do business in any state without needrealized a profit of $38 billion.The models
of state licenses. The U.S. Department of theassociated with risk management amongst
Treasury would then have jurisdiction toinsurers are also changing. The 100-year
regulate such national insurers. Argumentsaverage of history for forecasting future
against such an arrangement cite more endlesshurricanes, for example, is presently being
bureaucracy and red tape with fears thatrevised. And as those methods of calculations
individual states would not be equallybecome murkier, homeowners can hardly feel
treated.Alternatively, the Statesafe or comfortable when purchasing new
Modernization and Regulatory Transparencyproperties. There are also several states
(SMART) Act introduced in 2004 addresseswhich only allow for the issuance of property
market conduct, licensing and antifraud datainsurance based solely upon a consumer's
exchanges but has failed numerous times tocredit history and income which makes it far
move through the legislative process. Itmore difficult for the working class consumer
would leave regulation up to the states butto be able to purchase insurance.Over the
to comply with uniform standards withoutnext year, 43% of the U.S. population which
federal oversight. The attempt to "modernize"covers 18 states can expect their policies to
the regulatory framework of the insuranceeither be dropped by their insurance carriers
industry has become synonymous withor have their premiums escalate between 20%
deregulation and appears that resistance onand 100%. And for that reason alone it might
both sides of the argument makes reform morebe time to reel in an industry which not only
and more insurmountable along with immenseis in business to make a profit, but also has
struggles to provide sufficient delivery ofa moral obligation to help protect
adequate insurance for property owners.Thecommunities nationwide and such becomes
repeal of the McCarran-Ferguson Act has alsonecessary in the face of absolute
caught the attention of the Senate Judiciarydestruction.Copyright ©2006 Diane M.
Committee which held a hearing on the issueGrassi
on June 27, 2006 for the first time since
1994, precipitated by numerous complaints ofContact: Diane M. Grassi is a freelance
less and less public disclosure ofcolumnist, reporting and writing commentary
information and devices used for premiumon current events of the day providing honest
calculations. Such has impeded consumers fromand often politically incorrect assessments.
making a proper decision when purchasingFrom U.S. public policy to Major League
policies. Travis Plunkett of the ConsumerBaseball, she is an eclectic thinker, and
Federation of America (CFA) testified thatdemanding of her readers to reflect on their
"Insurers want competition alone to determineown thinking patterns from an alternative
rates, they say. How about a repeal of theperspective. Whether you agree with her or
McCarran-Ferguson Act to test their desire tonot, Diane M. Grassi will have you coming
compete under the same rules as normalback to note her opinions, and if at best she
American businesses?"The CFA has also calledwakes you up, then her goal will have been
for regulation to ensure consumers haveaccomplished.Ms. Grassi is featured with the
availability of enough information in orderonline publications: New Media Journal.us;
to compare pricing of policies betweenAmerican Chronicle; Mich News.com; Opinions
insurers in order to make informed decisions.Editorials; the Conservative Voice; Renew
Unlike the way most consumer service productsAmerica .us; Liberty Watch Magazine as well
are purchased, insurance costs are based uponas many others. She also writes regular
a non-finite uncertain condition to happencolumns on Major League Baseball where she is
some time in the future. And consumers musta featured online columnist with The Diamond
rely solely upon the agent, especially whenAngle Baseball Ezine and Sports-Central.org.
actuarial tables and insurance models areMs.



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