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Ralph Nader > In the Public Interest > A High Stakes Gamble by the Insurance Industry

The insurance industry is gambling for high stakes. By massively canceling policies or refusing to sell coverage without 300% to 1000% increases for many day care centers, nurse-midwives, transit authorities, physicians, municipalities, fishing fleets — to name a few sectors of the economy, the industry is betting that the resultant pressure will lead to the states granting it higher rates along with restrictions on injured peoples’ right to sue. Where insurance companies are not abandoning these various markets, they are demanding staggering price increases — up to 1000 for day care centers, for example.
There seems to be an underwriters’ ten year itch of greed operating here. Ten years ago, the companies bellowed about the “malpractice and product liability crises” and got higher premiums from the state authorities. Subsequent studies, including one by the U.S. Department of Commerce, revealed no such “crises” but the damage was done to consumers’ pocketbooks and insurers’ profits soared. Now, ten years later, we are witnessing., in actuary., Robert Hunter’s words, “a manufactured crisis intended to bloat insurer profits and reduce victim’s rights.• Already, in the first 6 months of 1985, auto insurance premiums have risen 9.1%, more than the rate of increase for all of 1964. At this rate, auto rates will rise 18.2% this year, far in excess of the increase in claims or inflation.

This “strike ’em or gouge ’em” gamble may just backfire. Americans do not like companies who refuse to sell to them, or who refuse to sell to them unless they get 3 or 5 or 10 times the previous price. Such business behavior turns people off. If the insurance industry is selectively going on strike, or abandoning certain markets or imposing wildly extortionate prices, then federal or even state government pools of insurance can be established to provide coverage for people who lose coverage through no fault of their own. Insurance is a necessity and if the companies do not want the business, those businesses affected simply cannot be required to close down. When those same insurers refused to offer insurance to properties in the center cities during the disruptions of the Sixties, the federal government offered the FAIR plans that kept insurance available in these cities. The government made money in this business contrary to insurance industry predictions.

The government has offered in the past many kinds of insurance where private insurers have balked — crop insurance for farmers, bank deposit insurance for savings accounts, and for some years flood insurance for properties on flood plains. Furthermore, federal law has facilitated self-insurance pools for companies who want to get together for coverage in product liability areas. So the insurance industry is gambling with the risk of inviting Uncle Sam and self-insurance by syndicates of their former business customers.

Leaders in the industry think they will win. Here are the words of John J. Byrne, chairman of the GEICO Insurance Company: “It is right for the industry to withdraw and let the pressures for reform build in the courts and in the state legislatures.” Instead of this massive industry using its leverage to advance pollution cleanup, safer consumer products and workplaces, it is, with few exceptions, behaving like a spoiled brat. For example, Engineering Times reports that the main underwriters for the 11,000 architectural/engineering firms will include a “pollution exclusion” in all future policies. This means that firms working on municipal treatment plants or projects involving emissions or recycling, reconditioning or reclaiming waste products won’t have insurance for these activities.

The insurance companies are using judges and juries as their favorite whipping boys, blaming verdicts and settlements for their troubles. If that is the case, why are casualty insurance company stocks selling at record prices on the stock exchanges? Why are stock brokers recommending to investors that these companies are great buys? Robert Hunter, President of the National Insurance Consumer Organization (344 Commerce Street, Alexandria, Virginia, 22314) will send interested readers a factual refutation of the casualty insurance industry’s contrived woes. Please include a large self-addressed, stomped envelope, with 44 cents postage.

It will take an informed citizenry and on informed media to stop the great insurance industry boycott of 1965. And investigations by Congressional Committees and the Justice Department will accelerate the exposure of this concerted over-reaching by these companies.