J. Robert Hunter must appear to be omnipresent to members of the insurance industry. They see him at their trade meetings, on radio and television, in their trade press, at state insurance commission panels and congressional hearings. Everywhere he is their hairshirt, a casualty actuary turned full-time consumer advocate for millions of auto, home, fire and life insurance policyholders.
Formerly Hunter was one of them–working in the insurance trade. Eleven years ago he came to Washington and soon became the federal insurance administrator, where he dealt with flood, crime and inner-city insurance programs. From time to time he would appear at state insurance departments to give his professional opinion that auto-insurance rates were too high. Insurance companies would go wild with rage.
In 1980 Hunter left government service and started the National Insurance Consumer Organization (344 Commerce St., Alexandria, Va. 22314)–a non-profit consumer watchdog of the insurance industry. Nothing like this had ever happened to this iant “cash cow”–this collection of companies whose technical argon and monopoly of actuaries had shielded its doings ecade after decade. Together with life actuary Jim Hunt, ormer Vermont insurance commissioner, Hunter has produced streams of reports, testimony and self-help consumer pamphlets designed to squeeze waste, inefficiency and deception out of insurance policies.
What irritates insurance moguls most is that Hunter is demanding more competition and an end to insurance industry-backed anti-competitive regulation. Claiming that “tens of billions of dollars will be saved,” Hunter asked Congress recently to strike down a federal law that allows state laws, written years ago by insurers, to foster rampant anti-consumer practices.
Testifying before the House Subcommittee on Housing and Community Development on April 1, Hunter declared: “Think of today’s economy, crying out for more productivity and lower out-of-pocket consumer cost, think of the insurance industry’s gross inefficiency, gobbling up–like PAC-MAN–almost 12 percent of the nation’s disposable income, yet paying back less than 50 cents for every dollar of income, think of this mammoth ($700 billion in assets) industry, free of antitrust-law application.”
The object of his reform is a federal statute known as the McCarran-Ferguson Act, which in 1945 delegated insurance regulation to the states with essentially no standards and no scrutiny. Unlike most other businesses in interstate commerce, insurance is still immune from federal antitrust enforcement.
This federal exemption allows the insurance companies to engage in cartelized rate-making and also to fix their insurance agents’ retail commissions. Furthermore, if you and your neighbors or friends want to form a group to purchase auto and other casualty insurance at reduced rates, forget it. Fifty state laws, written by the insurance industry, prohibit you from doing that.
In his fast-selling book, “The Invisible Bankers,” Andrew Tobias devotes many pages to the industry’s inefficiencies. He writes: “There are ways to improve the system radically. But this is not an industry, by and large, that seeks radical improvement. Inbred and living in comfortable isolation with its state regulators, it has been slow to innovate.” For Tobias, a major cure is to give this industry a hefty dose of competition by repealing state laws protecting it from competition against itself and from informed, organized consumer feedback.
If you want to learn more about this gigantic insurance “cash cow,” tune in the program NBC Reports: “Protection for Sale: The Insurance Industry” at 10 p.m. EST on April 17.