Thursday, December 15, 2011

Insurance Industry Manufactures Crises and Harms America

Great article today from Center for Justice and Democracy on the planned phony insurance 'crisis' planned by insurance companies to manufacture falsehoods to the American public in order to deny Americans access to the Courts and to advance tort reform.

The first definitive expose of 35 years of manufactured insurance crises. So far there have been three. They document how this industry is now creating a fourth.

Imagine an industry that sold a product which every person and business in America needed. This product was so important that the industry could literally threaten the economy of a state by pulling its product out. The seller of this product was accountable to no federal agency and regulated only by very weak state agencies. It was also exempt from anti-trust laws so the entire industry, including so-called “competitors,” could use the same collusive pricing agencies to help determine the product’s price – price fixing that would land others in jail. Other laws permitted it to keep its financial data secret, enabling it to routinely mislead lawmakers, regulators and members of the media about its financial condition. This secrecy allowed it to create phony “crises” to help promote its own legislative agenda, padding its bottom line at the expense of everyday Americans.

The industry’s economic cycles lead to what are known as “hard” and “soft” insurance markets; there have been three full cycles in the past 35 years, with soft markets characterized by stable or low rates (good for policyholders but disliked by the insurance industry) and hard markets, characterized by sudden and astronomical rate hikes for policyholders. These hard markets lead to sometimes devastating “liability insurance crises.”
While the existence of this self-made cycle is clear to insurance industry insiders, insurers often
publicly deny the cycle’s existence while their lobbyists try to take advantage of skyrocketing
rates to push for so-called “tort reform.”
A bill has recently been introduced to eliminate the anti trust exemption irrationaly enjoyed by insurers over the years at the expense of policy holders:

Study: Repeat Offenders: How the Insurance Industry Manufactures Crises and Harms America

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