Group: Insurance profits show federal terrorism backstop unnecessary

The Consumer Federation of America issued a study Monday showing that property-and-casualty insurers realized a record profit of almost $60 billion in 2006; the consumer group urged lawmakers to resist industry calls for a federal backstop for terrorism risk insurance and natural disasters.

The CFA said that within the last within the last 10 years the industry has suffered losses only in 2001, which was a result of the Sept. 11 terrorist attacks. Robert Hunter, director of insurance for the group, argued that payouts for claims continue to drop and that the industry is overcapitalized, forcing some insurers to engage in stock buybacks.

"Profits and a solid insurance industry are a good thing, but unjustified profits and excessive capitalization harm consumers," Hunter said. "Unfortunately, a major reason why insurers have reported record high profits and low losses in recent years is that they have been methodically overcharging consumers, cutting back on coverage, underpaying claims, and getting taxpayers to pick up some of the tab for higher risks."

The issue of insurance company profits will be a focal point as Congress gears up to tackle reauthorization of the federal government's terrorism risk-insurance programs. The industry already faces skepticism in Congress, as Senate Minority Whip Trent Lott, R-Miss., and Rep. Gene Taylor, D-Miss., have sued State Farm, alleging that the company denied their own wind damage claims from Hurricane Katrina -- which the companies would have to cover -- and instead registered them as water-damage claims to be covered under the National Flood Insurance Program.

CFA supports only a limited extension of terrorism risk insurance, for only nuclear, chemical and biological attacks.

"This law is getting in the way for building private capacity for terrorism coverage," said Travis Plunkett, legislative director for the group. It also opposes a proposal by Allstate and State Farm to create a federal reinsurance fund for natural disasters in the wake of the 2005 hurricane season, which resulted in $80 billion in insurance losses.

The Insurance Information Institute, an industry-supported group, said that 93 percent of insurers' profits from 2006 would be set aside in reserves to pay for future claims.

Marc Racicot, president of the American Insurance Association, noted that home and auto insurance rates are falling across the country, but not for coastal property insurance, another major concern to lawmakers. "This makes sense, given that insurance rates are set according to the risk of loss in each state," Racicot said.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Going Agile:Revolutionizing Federal Digital Services Delivery

    Here’s one indication that times have changed: Harriet Tubman is going to be the next face of the twenty dollar bill. Another sign of change? The way in which the federal government arrived at that decision.

    Download
  • Cyber Risk Report: Cybercrime Trends from 2016

    In our first half 2016 cyber trends report, SurfWatch Labs threat intelligence analysts noted one key theme – the interconnected nature of cybercrime – and the second half of the year saw organizations continuing to struggle with that reality. The number of potential cyber threats, the pool of already compromised information, and the ease of finding increasingly sophisticated cybercriminal tools continued to snowball throughout the year.

    Download
  • Featured Content from RSA Conference: Dissed by NIST

    Learn more about the latest draft of the U.S. National Institute of Standards and Technology guidance document on authentication and lifecycle management.

    Download
  • GBC Issue Brief: The Future of 9-1-1

    A Look Into the Next Generation of Emergency Services

    Download
  • GBC Survey Report: Securing the Perimeters

    A candid survey on cybersecurity in state and local governments

    Download
  • The New IP: Moving Government Agencies Toward the Network of The Future

    Federal IT managers are looking to modernize legacy network infrastructures that are taxed by growing demands from mobile devices, video, vast amounts of data, and more. This issue brief discusses the federal government network landscape, as well as market, financial force drivers for network modernization.

    Download
  • eBook: State & Local Cybersecurity

    CenturyLink is committed to helping state and local governments meet their cybersecurity challenges. Towards that end, CenturyLink commissioned a study from the Government Business Council that looked at the perceptions, attitudes and experiences of state and local leaders around the cybersecurity issue. The results were surprising in a number of ways. Learn more about their findings and the ways in which state and local governments can combat cybersecurity threats with this eBook.

    Download

When you download a report, your information may be shared with the underwriters of that document.