Insurance Law

Federal regulation of insurance, etc.

By David Rossmiller

I've had a number of stories by Becky Mowbray of the New Orleans Times-Picayune sitting around in my feedreader waiting for me to find time to comment.  Between the day job and the Trailer Lawyers, it's been difficult, but I can sneak some of them in here. 

-- This Mowbray story is about federal regulation of insurance, as opposed to the current state system. It's interesting that opponents of federal regulation claim it would amount to deregulation, which of course by that they mostly mean deregulation of rates.    

Consumer advocates counter that "optional federal charter" is code for deregulation, and there's nothing in it for policyholders. In their lobbying, deep-pocketed insurers would make sure that a federal system would resemble the most deregulated state systems, such as Illinois. Allowing companies to choose between being regulated by the states or the federal government would create a race to the bottom on regulation as the two systems would compete to attract insurers. Strong consumer-protection laws in California would be dismantled, and Florida would be powerless in its stand against insurance companies.

"I'm not opposed to a federal role, but the OFC is a bad idea because it gives the option to the insurance companies," said Hunter, who will release a study this week on the effects of different regulatory systems on consumers. "If I'm a state and I want insurance companies to choose my system, I would lower my standard. It would decimate regulation."

The kicker, Hunter said, is that [Treasury Secretary Henry] Paulson's proposal is short on details about consumer protection, but states explicitly that there would be no regulation of homeowners and auto insurance rates. He's not kidding.

"While numerous arguments have been made to justify such rate regulation, they are unpersuasive," Paulson's proposal reads. "Insurers should neither be subject to rate regulation nor be required to use any particular rate, rating element or price."

I wonder why some always assume that lack of central planning will result in consumers getting hosed.  The history of deregulation -- increased competition, in other words -- is to the contrary.  Can't say that it matters much to me either way, but it's interesting to think about.

-- Louisiana's efforts to shrink the risk profile of the state-run property insurer are bearing fruit, with new companies moving in to buy up some policies held by Citizens Property.

-- Allstate's posting of 150,000 McKinsey documents to its website wasn't enough disclosure, some are claiming.  They also want to see documents relating to hurricane catastrophe claims adjusting.  Allstate says it is reviewing to see if there are more relevant documents.

-- FEMA says it wants to change the formula by which insurers get paid for flood adjusting -- it says the formula worked well before, but resulted in a windfall for insurers for adjusting claims from Hurricanes Katrina, Rita and Wilma. 

-- Even though this is non-Mowbray, I'm also going to sneak in one Trailer Lawyer comment here.  I have no idea what the Trailer Lawyers are like in real life, they may be great people, steady as a rock, unflappable, whatever. I only comment on what I see in their public fight with State Farm, and, I'm trying to say this in a way that is not completely unkind. They need some professional public relations help.

This bombastic, chest-thumping pose they strike in pleadings and interviews with friendly newspaper reporters is not the way to go.  It's got the smell of fear to it, desperation, evasiveness, running for the tall grass. Whereas this kind of thing calls for a certain touch of Cary Grant, of David Niven, a certain grace under pressure, kind of like the characters Will Smith plays in the movies, the Trailer Lawyers give off the aura of folks in a chair fight on the set of Jerry Springer, some cross between Woody Allen and Travis Bickle, Robert DeNiro's character in Taxi Driver. ("You talking to me?").

Their selective analysis, including that incredibly ill-advised pleading where they refused to use the word "trailer," tells you that they are getting their clocks cleaned public relationswise. 

Full post as published by Insurance Coverage Law Blog on May 05, 2008 (boomark / email).