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