Insurers should be required to specify the price for terrorism coverage separately, thus allowing policyholders to clearly see the price increases for non-terrorism risks.

Congress should require the disclosure of ratemaking methods and data at least 45 days prior to the effective date of new rates.

Congress should require state regulators to certify that ratemaking methods and data produce adequate but not excessive rates.

J. Robert Hunter, CFAs director of insurance and an actuary, said his own analysis is that rate increases of somewhere between 15 percent and 30 percent might be valid. However, he said, rates are increasing by 50 percent or more, even up to 200 percent for some risks. “There is a feeding frenzy underway in the insurance industry,” he said.

Mr. Hunter dismissed suggestions that commercial lines policyholders had the ability to protect their own interests without government intervention. Most small businesses, he said, do not have professional risk managers and thus need protection. Moreover, he said, there is not a competitive market right now.

David Snyder, assistant general counsel with the Washington-based American Insurance Association, responded that the worst thing regulators could do right now is interfere with efforts to recover from the Sept. 11 tragedy.

Historically, he said, commercial lines has been an extremely competitive business, and price spikes dont last very long. It is not surprising, he said, that following a decade of low rates, insurers are seeking additional premium. Suppressing that process, he warned, would delay or prevent a recovery that will result in stability and lower rates.

Regarding the terrorism bill, Mr. Plunkett said that H.R. 3210, which would provide federal loans to help insurers deal with terrorism losses, comes close to the goal of protecting consumers. However, he said, the House leadership harmed the bill by attaching anti-consumer tort reform provisions. Thus, a bill that once had broad bipartisan backing will go with very weak support to a House-Senate conference to work out differences between the two bodies.

Mr. Plunkett blasted the Bush administrations proposal for a quota-share arrangement that would have the federal government pay for a significant share of losses above an industry-wide retention without any repayment provision. The Bush proposal, he said, would put taxpayers on the hook for billions at a time when the insurance industry is thriving.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, December 10, 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.

Contact Webmaster