WORD COUNT 572                                                                                                                                                                            October 24, 2007

INSURANCE, THE SOMEWHAT NECESSARY EVIL – by William A. Collins

Many ways,

To trim that fee;

By squinting at,

Your policy.

Not to say that insurance companies don’t occasionally lose money. Katrinas do happen. But that’s why early on the industry wisely invented re-insurance and other techniques designed to spread the risk of periodic Titanics and Chernobyls. Therefore most of the time the business is now mundane. It largely revolves around how to sidestep a regulation here or chisel a few customers there.

Then, once in a while, someone gets caught. Lately at a Hartford trial, some top execs from AIG and General Re were sent to the clink for cooking their respective books to the tune of $500 million. Now that’s the kind of numbers you expect in the insurance industry.

But lately the Bush administration has signed onto a long-latent industry scheme to make such show trials unnecessary. The idea is to curtail regulation altogether, thus allowing the companies to operate more or less any way they want. Today, you see, the heavy lifting of insurance regulation is carried out by the states. For example, our state insurance department recently fined Anthem $92,000 for late payment of claims. Not earth shattering perhaps, but at least it showed that someone was watching.

Under the Bush scheme, all that nuisance could end. Insurance companies themselves would choose whether they wished to continue under state-by-state regulation or cast their lot with a new regulatory bureaucracy in the Treasury Department. Given the “sleeping watchdog” attitude of the current administration, companies are understandably panting at the idea of reporting only to Washington. Executives would think they had died and gone to heaven.

Of course, there would be exceptions. Not every state has an alert insurance commission and stern attorney general. Some have cozy relationships between regulator and regulated. Under the administration’s concept, these trysts would be allowed to continue at the option of the company. Luckily, this scary fantasy bill may not survive the coming election.

One technique that some state insurance departments employ is to post reviews of various company performance measures on a state web site so that consumers can at least get a glimmer of corporate behavior. The likely outcome of such a review by average citizens would be a fervent wish to give up insurance altogether.

Of course, we can’t do that. Accidents do happen. What makes better sense is for individuals to hire an insurance adviser from time to time to review our coverages and to level with us about the companies. Do we really need collision coverage on that 6-year-old car, or that $250 deductible on the house? And worse, how do we compare health policies? “Consumer Reports” can certainly help, but periodic personal counsel is invaluable.

The same principle holds true when we have a loss. We need an adjuster on our side to negotiate with the company.

Lest you think that this rather harsh view of the industry is some sort of individual vendetta or an unresolved emotional disorder (always possible), here is a factor to ponder. Despite hurricanes, tornadoes, floods, and fires, insurance companies always seem to profit. Allstate caught public attention by netting $5 billion in 2006. Others announced similar giddy results. All this when the whole industry was supposed to still be in the tank from Katrina. In short, there are always tricks for the company to use in skinning the policyholder, so don’t buy any more of the stuff than you absolutely need. 

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Columnist William A. Collins is a former state representative and a former mayor of Norwalk, Connecticut. A photo of Bill Collins is available CLICK HERE

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