The Consumer Federation of America (CFA) and the Center for Economic Justice (CEJ) today urged state insurance regulators to reject a proposal they will consider later this week to deregulate auto and homeowners insurance and slash protections for consumers.
On Thursday, April 16, 2009, the Speed to Market Task Force of the National Association of Insurance Commissioners (NAIC) will vote to adopt or reject a proposal to significantly reduce oversight of auto and homeowners insurance. In an email to the members of the NAIC task force, CFA and CEJ urged the commissioners of insurance to vote “no,” questioning how regulators could even consider deregulation at the very time when the absence of effective regulatory oversight has plunged the national and world financial markets and economies into chaos.
The NAIC task force will debate a recommendation that reads, in part, “That the … states consider whether market conditions within their jurisdictions might be favorable for a movement toward a more competitive regulatory framework…” The NAIC is considering this proposal despite the fact that the white paper that offers this recommendation has information demonstrating that the markets for personal auto and home insurance are not meaningfully competitive and that market forces alone can not protect consumers from market abuses.
Insurers have long sought approval for the deregulation of rates for automobile and home insurance despite research that shows that price regulation protects consumers from unjustified rate hikes and that the lowest price increases over time occur in states with tough price review statutes. The fact that this recommendation is included in a paper documenting the conditions that make the proposal unwise is testament to the clout of insurance interests at the state level.
“It is astonishing that the states would consider a proposal to deregulate auto and home insurance at a time when even Alan Greenspan has recognized the failure of weak government oversight of the financial services industry” said J. Robert Hunter, Director of Insurance for CFA and former Texas Insurance Commissioner and Federal Insurance Administrator. “Americans, struggling to make ends meet, need increased, not reduced insurance price protection by the states, especially if they are required by law or by lenders to purchase auto or home insurance,” he said.
“State insurance commissioners defend state-based insurance regulation by claiming they are tuned in to local markets and consumer issues. But, the paper and recommendations represent a startling lack of understanding by regulators of the problems insurance consumers face today when buying auto or homeowners insurance,” said Birny Birnbaum, executive director of CEJ.