Bob Hunter, director of insurance at the Consumer Federation of America, pulls no punches in laying the blame right at the feet of insurance regulators. He points out that insurance companies are using a number of tricks to eliminate their risk while the homeowner takes it on the chin with rates that continue to climb. “It simply requires regulation,” says Hunter. “Why haven’t rates gone down? Are they (insurance companies) gouging?” Ya’ think?
A significant factor in rates staying high is the continuing problems of AIG. This mammoth insurance conglomerate, that has a large presence in Louisiana, was the first major insurance company to be bailed out as the recent Wall Street crisis evolved. Congress authorized an injection of more than $130 billion in taxpayer funds to AIG and its numerous subsidiaries.
Here’s why major international insurance groups like AIG are important to small states like Louisiana. It’s not the population of a state that matters. It’s where the risks are located. And there are a number of major companies operating in Louisiana that have significant exposure for insurance purposes. Just imagine the cost of insuring the offshore oil industry operating along Louisiana’s coastline. How about the nation’s largest chemical industry located up and down the Mississippi River? And there are major risks to insure in the first, third, and fifth largest ports in this country all located in Louisiana.
In short, Louisiana is in the top five of states that have the highest industrial insurance risks. That means Louisiana is a major customer for many insurance companies both nationally and worldwide. Other large industrial states share similar major industrial risks and need large national and international insurance companies to offer needed insurance protection, but none of them have had the excessive increases in insurance rates that Louisiana has.
In virtually every other state, there is a consumer protection office, often located under the office of the Governor or the Attorney General. The mandate of a consumer protection office is to independently check and audit regulated companies to be sure that they are following the law. But in Louisiana, there are no impartial checks and balances. And the loser, of course, is the policy holder, the ratepayer, the consumer.
Although the company has a major presence in Louisiana, insurance officials have chosen not to audit AIG’s activities. In years past, no insurance group was immune from being audited, particularly as financial problems began to occur. In 1993, Louisiana joined Texas in doing the first major audit of Lloyd’s of London, the world’s largest insurance company. But since the deregulation mode has obtained a firm grip on Louisiana, major companies like AIG have become free from state oversight.
The concern for Louisiana policyholders should be: why does it take an official in another state to initiate an investigation of potential mismanagement and misuse of funds that come out of the Bayou State? In Louisiana, there is no pre-approval limitation of increasing your insurance rates that are now the highest in the nation. And Louisiana law specifically prohibits giving its citizens separate insurance consumer protection by the Attorney General or any other official office.
So the bottom line is: thanks to the legislature and the Insurance Department, the Louisiana insurance policyholder has less protection than policyholders in just about any other state in America. And while the AIG shenanigans continue to be ignored in Louisiana, the politicians in Washington keep telling us that companies like AIG, for the good of the country, have to be saved no matter what, regardless of the huge burden on the taxpayers.
The way the politicians see it, these companies are too big to fail. And the fleecing of you and me, the taxpayer, well, that’s just collateral damage.
Peace and Justice
Jim Brown’s syndicated column appears each week in numerous newspapers throughout the nation and on websites worldwide. You can read all his past columns and see continuing updates at http://www.jimbrownusa.com. You can also hear Jim’s nationally syndicated radio show each Sunday morning from 9 am till 11:00 am, central time, on the Genesis Radio Network, with a live stream at http://www.jimbrownusa.com.