In the Wake of Harvey and Irma, Accountability Measures Recommended to Ensure Fair, Timely Claims Settlements
In the wake of Hurricane Harvey and Irma’s devastating damage, CFA wrote to the Federal Emergency Management Agency (FEMA) and the insurance commissioners of states impacted by the storms calling on them to initiate a public accountability program to ensure the fair and timely settlement of insurance claims.
“As families rebuild, they deserve a public commitment from the nation’s insurance companies to hold up their end of the insurance bargain and pay claims quickly and fairly,” said CFA Director of Insurance J. Robert Hunter. “Insurance Commissioners and FEMA must play a central role in holding these companies to account by keeping a public spotlight on their customer service over the next several months.”
CFA is urging FEMA and state insurances commissioners impacted by Hurricanes Harvey and Irma to issue a claims servicing-related data call from each of the top 20 insurance companies in their state writing wind coverage under a homeowners insurance policy, and it is urging FEMA to do the same in these states for the top 20 Write Your Own (WYO) flood insurance servicing companies.
“Commissioners and FEMA should ask all major insurers to commit to fair and fast claims service, and company executives should join Commissioners in news conferences making these commitments public,” said Hunter. “Insurance executives must understand that they are personally accountable, as the face of their company, for the handling of these disaster claims.”
In the days following Hurricanes Harvey and Irma, CFA published steps consumers can take to get fair insurance claims, including filing claims quickly, maintaining receipts for any expenditures related to repairs and living expenses, and watching out for fly-by-night contractors who might approach them to repair their home.
“Not all insurance companies handle claims badly, so go into the claims process with an open mind,” Hunter said. “Be vigilant, though, and be ready to stand up for yourself and your family, or you run the real risk of being shortchanged.”
SEC Urged Not to Weaken Standards Governing Investment Advice
The Securities and Exchange Commission (SEC) must resist industry pressure to water down the standard that applies to investment advice, CFA cautioned in a letter to SEC Chairman Jay Clayton last week. “No issue is more important for average retail investors than the regulation of financial professionals,” the letter states. “That is because investors’ lack of financial sophistication and heavy reliance on recommendations by investment professionals makes them vulnerable to abuse.”
In its letter, CFA documents the long history of inaction and harmful action by the SEC that has left investors unable to distinguish brokers, who offer episodic sales recommendations subject to a weaker suitability standard, from investment advisers, who are required as fiduciaries to act in their customers’ best interests. It outlines two options the Commission could adopt to rectify the situation: either by restoring a clear functional distinction between brokers and advisers or by imposing a fiduciary standard on all investment recommendations.
The letter also explains why the proposal being advocated by SIFMA and other industry groups weakens, rather than strengthens, protections for vulnerable investors who turn to professionals for advice. “The SIFMA proposal does nothing to strengthen the existing suitability standard except add a few disclosures that previous research has shown investors are unlikely to understand or act on,” said CFA Director of Investor Protection Barbara Roper. “It does nothing to change the harmful practices common among brokerage firms that encourage and reward advice that is not in customers’ best interest.” Worse, industry proposes that this watered down standard would substitute for compliance with the more stringent Department of Labor rule.
Based on its past record, there’s good reason why industry groups are confident they can prevail at the SEC, Roper said. “For nearly two decades, the Commission has acted time and again to weaken protections for investors by making it easier for broker-dealers to masquerade as advisers while being regulated as salespeople. Chairman Clayton now has an opportunity to rescue that failed policy and provide the rational, pro-investor policy for the regulation of financial professionals that we and others have sought for close to two decades. We urge him to do so.”
Meanwhile, the Department of Labor has proposed to delay implementation of key components of its fiduciary rule while it continues to consider amendments. Under a proposal that the Department put out last month, provisions of the rule necessary to make the fiduciary standard enforceable would be delayed for an additional 18 months until July of 2019.
CFA submitted a letter last week in opposition to the delay, arguing that, “Extending this transition period will mean that the full protections and benefits of the fiduciary rule won’t be realized and retirement savers, particularly IRA investors, will continue to suffer the harmful consequences of conflicted advice.”
“Unfortunately, the new DOL appears to have decided that it’s more important to protect financial firms’ bottom lines than to protect retirement savers from harmful advice,” said CFA Financial Services Counsel Micah Hauptman. “We strongly urge the agency to reconsider its decision.”
Coalition Urges USDA to Follow the Law on GMO Disclosures
CFA joined with other consumer advocates, proponents of sustainable agriculture, and food companies to write to the U.S. Department of Agriculture (USDA) last month urging the Department to create a meaningful disclosure standard for genetically modified (GMO) foods.
Last year, Congress passed the National Bioengineered Food Disclosure Standard, which preempted a Vermont GMO labeling law and instead requires USDA to establish a mandatory, national disclosure standard for GMO foods by July 28, 2018. In their letter, CFA and its allies urged USDA to create a meaningful disclosure standard that is consistent with congressional intent.
Recognizing consumers’ right to know about GMO foods, they wrote, the standard should apply to all foods, including GMO foods that contain ingredients derived from GMO crops; be consistent with international regulations and standards; allow consumers without smartphones or reliable cellular service to access the GMO disclosure; exempt very small food manufacturers; and avoid conflict or regulation modifications with existing organic standards.
“Nine out of ten Americans consistently report they want the right to know if their food is produced with genetic engineering – the same right held by consumers in 64 other countries,” the groups wrote.
“This legislation was the result of a bipartisan compromise and the Trump Administration should respect the labeling requirements that Congress has established, including the deadline to publish the new standard,” said CFA Food Policy Director Thomas Gremillion.
CFA Informs EPA that Americans Support Stronger Fuel Economy Standards
Pushing back against the Environmental Protection Agency’s (EPA) move to reconsider fuel economy standards set to go into effect through 2025, CFA Director of Public Affairs Jack Gillis presented research at a public hearing earlier this month demonstrating that the current fuel economy standards are cost-effective, achievable, and supported by the majority of Americans.
“Our analysis clearly indicates that the car companies are fully capable of meeting the CAFE standards and they are able to do so with great savings for consumers,” Gillis said. “Rolling back the standards at this point would not only hurt America’s already financially beleaguered consumers, but would hamper vehicle sales and put U.S. car companies at a distinct competitive disadvantage to the Asian car companies who will meet the standards.”
A recent national survey commissioned by CFA shows that 79 percent of Americans, including 68 percent of Republicans, support the standards. Only 18 percent of those polled were opposed.
Congress and the Administration are being pressured by car companies to roll back the nation’s fuel economy standards that manufacturers, unions, consumer groups and environmental organizations agreed to in 2012. They are doing so despite the fact that auto manufacturers are making good progress in complying with the law, and consumers are buying more fuel efficient vehicles. Comparing the sales figures for 2016 SUVs and light duty trucks with the 2011 models, those models that increased fuel efficiency by over 10% sold nearly 20% more vehicles than those with a less than 10% increase in fuel efficiency.
In addition, the fuel economy standards have already saved consumers billions of dollars. Between 2008 and 2016, consumer pocketbook savings were close to $500 billion, macroeconomic benefits were over $300 billion, and environmental, public health and other benefits were worth about $120 billion, according to CFA’s analysis. “With costs at just under $120 billion, and the overall benefit of about $900 billion, the benefits of the regulations are over eight times their cost,” said CFA Senior Fellow Mark Cooper.