Insurers should pay for their own mistakes

http://www.property-casualty.com/News/2009/4/Pages/Consumer-Watchdogs-Want-Insur…

Consumer Watchdogs Want Insurers To Rein In Surge Costs
NU Online News Service, April 22, 8:52 a.m. EDT
Consumer watchdogs are urging a closer look at insurers’
estimation of post-catastrophe material and labor price increases,
citing a study questioning demand surge figures used to set insurance
rates.
Citing a March 20 National Underwriter article, Birny Birnbaum,
executive director for the Center for Economic Justice, urged the
nation’s insurance commissioners to review the use of demand surge in
premium pricing, saying it unnecessarily adds 20-to-30 percent, if not
more, to the cost of insurance.
“Demand surge has been a relatively unexamined component of
catastrophe models,” Mr. Birnbaum wrote.
The NU article reported on the research of Anna Olsen, a
researcher at Colorado University who said she found that the cost
associated with rebuilding after catastrophe, and what insurers claim is
the subsequent increase in cost of labor and materials as a result of
demand, was not proven in her research.
Other economic factors in play before the catastrophe attributed
to price increase, she said, and when labor and supplies were abundant
there was no measurable increase in materials or labor costs see NU
Online, March 20, “Demand Surge Not Driven by Economic Demand”).
The letter, signed by Mr. Birnbaum; Bob Hunter, director of
insurance, Consumer Federation of America; Amy Bach, executive director
of United Policyholders; and Doug Heller, executive director, Consumer
Watchdog, asked the regulators to review rate filings for “unjustified
and unreasonable demand surge provisions in the rates.”
It also asked the National Association of Insurance
Commissioners to support creation of a public catastrophe model to
ensure regulators and the public have access to catastrophe modeling
information.
In an interview with National Underwriter, Mr. Birnbaum said he
received one response from Connecticut’s regulator saying he shared Mr.
Birnbaum’s views.
Mr. Birnbaum said demand surge unnecessarily adds to the cost of
insurance and he urged the NAIC to remain on track with plans to
develop a public model that would be a benefit to both the public and
regulators when making rate decisions.
He added that the assumptions in catastrophe models should be
reasonable and not “added on for no reason.”
Read the letter UP sent to all insurance commissioners


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Source: https://uphelp.org/insurers-should-pay-for-their-own-mistakes/
Date: April 19, 2024