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Ralph Nader > In the Public Interest > Insurers: Sacred Cows Feeding Public No-So-Sacred Bull

This article is first in a series of three articles on the insurance situation

Last year the liability insurance companies increased their premiums by another $25 billion — the equivalent of $100 for every man, women and child in the country. On the New York Stock Exchange, the shares of these property casualty companies rose by 50%, nearly twice the rise of the Dow Jones index. Wall Street is expecting sharply rising profits the rest of the decade.
In the same year, this industry arbitrarily cancelled the insurance coverage of thousands of businesses, ranging from small trucking firms and manufacturers to fishing boat operators to day care centers, as well as municipalities, housing authorities and mass transit companies. Even the tram operator carrying tourists up Mount Rushmore for 30 years without a claim was cancelled. For others still able to obtain coverage, premiums have skyrocketed 300, 600, 800 or 1000 percent.

For 1986, more of the same is expected by insurance industry observers. Protest letters from small business people are pouring into our offices and those of the National Insurance Consumer Organization (121 Payne Street, Alexandria, VA 22314). Insurance is supposed to facilitate commerce, but now it is undermining or obstructing commerce.

One letter came from Robert Johnson who invented a tree pruning device and in the Seventies built a small company which sells the product to Sears, Roebuck. “I have lived the American dream,” he told me from his Norwalk, Connecticut offices. Not a single claim has been filed against his firm. Suddenly in December his insurance company cancelled his product liability policy even though the premium had tripled in four years.

He was faced with a shutdown of his business because Sears would not buy his product without such coverage. I called the president of the insurance company in Chicago. The receptionist said he was in conference and would call back. Two hours later an elated Mr. Johnson called instead to say the company renewed his policy.

The point of this story is that actuarial data or loss claims experience are irrelevant to the “strike ’em or gouge ’em” practices of insurance companies bent on bloating their profits and manufacturing a crisis to stampede legislators into restricting the rights of injured people to compensation and deterrence. According to the Institute for Civil Justice. The size of jury awards and the number of lawsuits since 1960 have barely kept up with inflation and population increases. The insurance industry ignores these statistics and repeats a few tired case anecdotes in a highly distorted context.

In response to the liability insurance industry’s cyclical behavior -­every ten years its behavior goes wild with cancellations and rip-offs -­people need to learn more about the amazingly privileged position of these companies.

Sample the following if you please. The insurance industry lobby has pushed through laws which exempt it from the federal antitrust laws and federal regulation. The foreign reinsurance giants (such as Lloyd’s of London) which demand that the domestic insurance companies engage in anti-policyholder practices, are not regulated by the states nor the federal government. The U.S.A., comprising half the world’s insurance market, is still dependent on foreign reinsurance companies who want to reduce the rights of injured Americans to the lowest west European denominator while siphoning billions of premium dollars out of the country each year.

The property/casualty industry has obtained state legislation many years ago prohibiting both businesses and consumers from banding together to purchase group liability policies as they can do for group health and life insurance. What’s more, the federal income tax code’s section regarding insurance is a dream come true. According to the General Accounting Office, an arm of Congress, the property/casualty companies as a whole earned a profit of $75.2 billion during the period 1975 to 1984 but paid no federal income tax. For too long, this industry has been a sacred cow feeding the public a lot of sacred bull. Technical jargon and obscure accounting have been its camouflage from accountability.