Wednesday, March 21, 2007

Insurance "market" in collapse

I have harped endlessly on the collapse of the private property-and-casualty insurance market, but nothing sums up the problem better than Louisiana Insurance Commissioner Jim Donelon's warning to the Associated Press:

Shopping around can also be a risky strategy, because homeowners in
Louisiana who switch are no longer protected by a state law that bars insurers
from canceling policies that have been in effect for three years or

“Do not shop," said Louisiana Insurance Commissioner Jim Donelon. "That
protection outweighs the advantage of shopping, in my opinion."

Any business model in which we are not free to shop around is no longer a market solution.

The insurance companies recognize this and appear to be setting their prices accordingly. My own policy, purchased for $1.85 a square foot in February of 2006, I considered to be the price of living in the post storm world. (No, my Midwest friends, that is not a typo: 1-point-8-5). It was so high I could not imagine it would go up much more without some reason, such as a catastrophic claim. I was wrong. It went up to almost $2.25 a square foot. (Thanks Republic). So I was forced to shop around, and give up a year's protection under the law.

While Louisiana politicians dance politely around the issue in apparent fear of the insurance lobby, Republican strongholds like Florida and Mississippi are moving ahead with radical changes to address the issue. If Donelon's warning weren't enough, the fact that Republican strongholds are moving away from the pretense of a functioning market toward government intervention tells the same story: private insurance no longer serves our needs.

Worse, it is increasingly clear that the insurance companies have grown into something approaching a criminal enterprise, willing to commit massive and obvious fraud in Louisiana and Mississippi in the pursuit of every higher premium collections with little or no payout. We not not just dealing with a market in collapse, but a market run but companies that are increasingly the largest form of organized crime in America

If the market is in complete collapse the economic future of an entire region is jeopardized by that failure. Without affordable insurance, there will be waves of bankruptcies as home mortgages are called, and banks will collapse. It's time for government and citizens to act.

It's time for a radical change of some sort, such as abolishing private property insurance, or banning the sale of auto insurance by carriers that won't sell home owners insurance. At a minimum, there needs to be a national or regional pool for wind damage as there is for flood to spread the risk over a large population,

Without some drastic measures, the storm that will finally clear the Hurricane Coast will be one of home repossessions and bank failures. If the government (both state and federal) waits until its time to bail out their good friends the bankers, it will not just be an industry that is in failure: it will be any remaining pretense of government of, by and for the people.

There are quite a few people weary of an insurance career because they think they have to be an aggressive sales person. Of course, sales is a necessary ingredient, however insurance is a service everyone needs. Besides, most positions do not require straight sales.
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"And when we speak we are afraid our words will not be heard nor welcome, but when we are silent we are still afraid. So it is better to speak remembering we were never meant to survive." -- Audie Lorde

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