The property/casualty insurance industry is one of the least regulated and anti-competitive industries in the nation. Most state insurance departments have neither the authority nor staffing to exercise proper control over insurance industry pricing and underwriting practices. At the same time, the industry has been exempt from anti-trust laws since 1944, allowing insurance companies to engage in anti-competitive behavior that for other industries would be punishable by jail time.
Such “freedoms” allow this industry to exploit people and businesses by dumping risk, raising rates and abandoning policyholders altogether. It allows the industry to threaten to pull the rug out from under a state’s economy to get what it wants, including legislative changes that strip everyday people of their legal rights, while escaping any meaningful public scrutiny or regulatory control.
The Center for Justice & Democracy has issued two new publication with some great examples of how all this works.
First, CJ&D’s new publication, Big Trucks: An Avoidable Public Safety Crisis shows that truck owners have been price-gouged for about a decade now. Specifically, Commercial Auto Liability insurance, which is dominated by trucking, has experienced some increasing claims due to the growing numbers of truck crashes, the growing “epidemic” of distracted driving and more drivers on the road. Yes, you might expect this would lead to some gradual premium increases.
But the data show that the insurance industry has been over-correcting through excessive reserving and unnecessary rate hikes for years. That means whatever premiums these companies have been charging is completely out of whack with the whatever insurers have been paying out.
Second, in Reinsurance: A Secretive Foreign Industry That Can Cause Great Harm In The United States, CJ&D shows how the reinsurance industry (reinsurance is insurance for insurance companies) is controlled by foreign companies that are accountable to no federal or state agency, and subject to virtually no U.S. regulatory laws This allows them to precipitate liability insurance crises for businesses. Because states generally have no data collection requirements for any insurer let alone foreign reinsurers, these companies can easily mislead lawmakers, regulators, the media, and the public with exaggerated claims or demands, with little scrutiny.
The good news is that there are solutions to stop this kind of corporate abuse.
The trucking industry must demand accountability from the insurance industry. Trucking companies need to ask state insurance commissioners to do a better job of reviewing commercial auto liability rates and prevent insurers from price-gouging. And they should call on lawmakers to do more to ensure that commercial auto insurance rates are subject to transparency and oversight, especially by requiring prior approval of commercial auto premiums.
As for reinsurers, even weak state insurance disclosure laws do not apply to them. Reinsurers currently submit little or no financial information to state authorities including fundamental facts such as how much in premiums it collects per line of insurance, or its losses. Requiring them to divulge this information could help tremendously.
The property/casualty insurance industry exerts significant economic control over our lives. The lack of accountability can be extraordinarily damaging, and it needs to end today.
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