Federal Re Pool CreationShould Require Disclosure
To The Editor:
The property insurance industry is understandably looking for some help to deal with the unpredictability of potentially billions of dollars in liability due to terrorist attacks. Not surprisingly, it is looking to the federal government for that help, and the industry is likely to get it. The public is entitled to certain protections in return.
Various proposals have been floated by the industrys friends in Congress and the White House. Whether the support takes the form of a split of liabilities between the industry and government, the formation of a government-backed reinsurance company or the creation of a catastrophic loss fund, the federal government will be assuming a substantial new role in the property insurance industry. And taxpayers could be liable for as much as $100 billion.
If the federal government is to provide the bailout or backstop that the industry is requesting, many reasonable voices will call for some form of federal regulation. The industry has spent millions of dollars fighting such oversight and defending a system of state regulation that has not proved up to the task in many areas of consumer protection.
At a minimum, the industry should inform the public about who is being served by the industry, and who is not, if it is to get the federal protection it is seeking. Specifically, this means requiring Home Mortgage Disclosure Act-like disclosure for the property insurance industry.
Under the HMDA, most mortgage lenders are required to publicly disclose:
Information on the race, gender, and income of all applicants.
Whether the application was approved.
The type (conventional, government insured) and purpose (home purchase, improvement) of the loan.
All of this information is made available at the census-tract level. (The Federal Reserve Board is considering new rules that would require disclosure of the annual percentage rate of all loans.)
For property insurance, the picture is quite different. Only eight states collect any insurance disclosure data at all, and in each case they are collected at the ZIP code rather than census-tract level. No race, gender or income data are reported. Data on individual insurers are available in just four of these states. The rest provide aggregate data on the larger insurers in the state.
If the federal government, which means all taxpayers, is to assume the major potential liabilities the industry is requesting, such disclosure constitutes the minimum oversight that should be required. It is time to let the sun shine in on the property insurance industry.
Gregory D. Squires
Chair
Department of Sociology
George Washington University
(Note: Mr. Squires is also co-author of “Color and Money: Politics and Prospects for Community Reinvestment in Urban America,” published by SUNY Press in 2001.)
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 12, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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