Seen at Insurance Journal:
The 12-page response to a Jan. 18 order staying the suspension argued, among other things, that Allstate’s failure to provide the documents is a crime and “further evidenced a continuing attempt by [Allstate] to improperly subvert, manipulate and undermine the regulatory process. There can be no more clearer threat to the safety and welfare of the public than a continuing willful violation of the law.”
Florida Insurance Commissioner Kevin McCarty said, “Allstate has continued to do everything it can to keep from providing the documents requested in the subpoenas sent by my office Oct. 16, so now I am doing everything within my power to ensure that the documents are produced. They keep insisting that they are working to produce the documents, but the fact remains that all of the documents were due last Tuesday (Jan.15) at the hearing, and they were not there. I also am frustrated that Allstate keeps trying to tell us which documents are relevant to our investigation.” [...]
“It seems to me that providing the requested documents should be an easy decision, unless Allstate really has something to hide,” said Bob Hunter, director of insurance for the nonprofit Consumer Federation of America and a former Texas insurance commissioner.
Why, this is almost as much fun as watching the Scruggs circus underway in Mississippi.
Here we go again.
From the AP wire:
The Consumer Federation of America’s insurance director, J. Robert Hunter, said insurance companies have enjoyed robust profits and contained losses largely by “methodically overcharging consumers, cutting back on coverage, underpaying claims and getting taxpayers to pick up some of the tab for risks the insurers should cover.”
Hunter’s comments came with the release of a study by Consumer Federation, Consumers Union and several other consumer organizations that said the industry’s overcharges reached an average $870 per U.S. household over the last four years.
An Insurance Journal article on the subject adds:
Finally, the CFA says insurer profits are higher than they need to be. It estimates that after-tax returns for 2007 are about $65 billion, just under the record level set in 2006. In 2007, the study estimates that stock insurers will earn a return on equity (ROE) of more than 19 percent, well in excess of what is required by investors. It claims that the lower industry-wide ROE of 7.6 percent that insurers report underestimates the industry’s actual ROE.
The IJ article offers an industry rebuttal, the gist of which is that the CFA is using an apples-and-oranges comparison, criticizing insurers for their practices in personal lines insurance, when looking at ROE’s inflated by workers comp and other long-tailed lines…and oh, by the way, they made an accounting error in their number-crunching which magnifies the “problem”.
I can’t comment on the accounting error argument…but when it comes to personal lines, I can point out that the near-commodity nature of the business means that if a consumer thinks they’re paying too much for too little coverage, the odds are they’ll be able to find a better price in the market from a different carrier…provided sufficient capacity exists in the market.
And what’s the best way to ensure capacity? Give capital providers an opportunity to earn returns comparable to the risk faced.
You’d think that if a consumer group were really concerned about excess profits in the insurance industry, they’d invest in insurance companies…and then use their share of those excess profits to subsidize the rates of their constituents.
Three articles in my reading pile today struck me as being someone interestingly related.
First, RiskProf points to a comment by Bob Hunter in the Christian Science Monitor on a new direction of attack in his war on credit scoring in insurance rating and underwriting.
“A lot of people don’t think about how this classification system works,” Hunter says. “I think most people say, ‘Oh, the rate is $50 less, I’ll take it.’ They don’t [realize], ‘The reason I’m paying $50 less is because some poor people over there have to pay $100 more.’”
Next, seen in a Toll Roads News post on the Big Dig HOV lanes:
High Occupancy Vehicle lanes (HOVLs) in the Big Dig tunnels in Boston costing around $250m are largely unused two years after opening, the Boston Globe reports. They counted 181 vehicles in a recent peak hour northbound and only 112 southbound. The Turnpike’s traffic counts show between 59 and 167 vehicles/hour are using the lanes through a broader survey period. Traffic lanes in expressway conditions like the Big Dig have a capacity of 1,600 to 2,400 vehicles per hour so the HOVLs are 90% to 97.5% empty.[...]
When the Big Dig HOVLs were opened two years ago (2005-09-23) the then Massachusetts Turnpike chief Matt Amorello said in a press statement: “One of the goals of the Central Artery/Tunnel Project was to help the environment by promoting carpooling and the use of mass transit. These ramps, as part of the Big Dig’s extensive HOV network, provide a strong incentive toward that end. With gas prices hovering around $3 a gallon, we’re confident that this change will get more people carpooling or taking the bus into Boston.”
And third is an article that ran over the weekend in the Concord Monitor:
Edwards, a former Democratic senator from North Carolina, says the federal government should underwrite universal pre-kindergarten, create matching savings accounts for low-income people, mandate a minimum wage of $9.50 and provide a million new Section 8 housing vouchers for the poor. He also pledged to start a government-funded public higher education program called “College for Everyone.”
“It is central to what I want to do as president to do something about economic inequality. I do not believe it is okay for the United States of America to have 37 million people living in poverty,” he said in a meeting with Monitor reporters and editors this week. “And I think we need, desperately need, a president who will say that to America and call on Americans to show their character.”
At every stop, Edwards said, he tells voters he’ll ask them to sacrifice. Asked to describe what he means, he described his plan for increases in capital gains taxes, saying taxes on “wealth income” should be in line with those on work income.
The thread linking these three snippets in my mind is the notion that people will voluntarily engage in self-sacrifice for the greater good. It’s something that I’d like to believe happens…and it certainly does with some folks…but across society as a whole? I don’t buy it.
In the first passage, Bob Hunter seems to be picking up on something a few of us have been saying for a while — that when credit scoring is implemented correctly, you end up with a majority of folks seeing reduced rates, and a minority seeing increased rates. There’s been observed a little correlation between score and certain demographic attributes, and thus Bob seems to make the argument that if you go for lower rates at the expense of the huddled masses, you’re a Bad Person.
(I don’t entirely buy the notion within the context of insurance…or at least I think if there’s a perceived societal need to subsidize the huddled masses’ car insurance, it ought to be handled through government mechanisms, rather than by regulatory imposition of inefficiency on the free market…but I digress.)
In the second passage, I’m reminded about the apparent attitude among many (most?) Americans when it comes to conservation issues. Maybe many folks will today voluntarily engage in the warm and fuzzy feeling of changing a single incandescent light bulb over to a CFL, or seek to buy a trendy Prius as their new car of the year…but when it comes to real conservation, including carpooling, the use of mass transit, etc., I don’t see many folks being able to be bothered.
The third quoted article reminds us that there is a horde of President-wanna-bes who perceive (arguably correctly) several tragic issues in America today — health care, increasing pressures on lower-income families, etc. — that ought to be fixed. At least Edwards appears to be up front in some circles that such fixes will likely be expensive, ad that funding will have to come from somewhere.
Perhaps I’m just extra-cynical today, but it seems to me that in America, we love to talk the good talk and portray the image of being kind to one another and doing the right thing for society as a whole. However, when folks are called upon to really sacrifice….well, many (most?) folks can’t be bothered to be inconvenienced.
I know that there are many examples here and there, quiet, in onesies and twosies, that challenge my gross overgeneralization….and I agree that by and large people are generally good at heart. However, that doesn’t stop me from being…interested in our society’s tendency to present a kinder, gentler image…as long as it doesn’t cost or inconvenience us in any way.
