From Insurance Journal comes this head-shaking bit of news:
On March 27, CFA and CEJ wrote to the National Association of Insurance Commissioners raising questions about recent upgrades in the RMS wind models that the groups maintain would lead to “unjustified increases in homeowners and other property casualty insurance rates.”
The letter, signed by CFA’s J. Robert Hunter and CEJ’s Bernie Birnbaum, called for state regulators to increase regulation of RMS and other third-party organizations, including credit-scoring firms, whose work impacts insurance rates and availability.[...]
“RMS has become the vehicle for collusive pricing,” the letter charges, because it relied upon opinions from insurers to switch to the medium term five-year view of risk.
CFA and CJE allege that insurance companies sought this move to justify higher rates and this desire put RMS in a competitive bind.
I don’t know about you folks, but I know that my company’s finance guys, the folks who negotiate reinsurance purchases, and marketing staff (underwriters, for my area of interest) aren’t looking forward to the upcoming model revisions that will apply rate pressure, make reinsurance more expensive, and increase capital requirements to maintain ‘A’ ratings.
I think that there is room for debating the subject of whether decades-long cyclicality should be considered in the insurance world. The consumer advocates do imply a good point — the answer shouldn’t be “whichever is higher”.
Of course, the consumer advocates perhaps need to be reminded that the answer should also not be “whichever is lower’.
It would be nice if the consumer advocates could get their act together and perhaps actually propose something constructive, rather than just pointing at news releases and screaming.