INDIANAPOLIS (Jan. 10, 2008) - The National Association of Mutual Insurance Companies (NAMIC) issued the following statement in response to allegations by the Consumer Federation of America regarding record profit levels among insurers. The comments may be attributed to Carl Parks, NAMIC’s senior vice president for government affairs.
"Once again, consumers can rest easier knowing their insurance companies are in a strong position going into 2008. A stable and competitive insurance market is absolutely critical to our nation’s economic health. With our economy suffering some bad news in recent months, the strong financial standing of an insurance industry that was hobbled after 9/11 and the horrific hurricane season of 2005 is great economic news for all Americans. Additionally, a vibrant insurance industry is vital to hold down rates and increase competition for consumers.
"Auto and homeowners insurance rates have declined in most areas of the country. Coastal regions have been the exception, but even in many of these higher risk areas, rates are leveling off, primarily in those states that have adopted responsible mitigation practices.
"Florida, of course, is the exception. The governor and the Legislature took a path that puts insurance consumers and taxpayers at financial risk in the event of a major storm. Forcible rate reductions may have taken place in a small segment of the market there, but these rates do not reflect the risk. Consumers will ultimately suffer from these changes.
"NAMIC will pursue legislation in Florida and other states that allows insurers to charge the rates necessary for a healthy industry, leading to more competition and overall reduced rates and more insurance availability for consumers.
"The tired argument that insurers are making too much profit is just that - tired. Consumers are not fooled by these absurd allegations from CFA and, in fact, understand the disservice these misguided reports create. This report is grandstanding and finger pointing and has no basis in economic principle. Each line of insurance in each state must stand on its own performance. National profitability numbers do nothing to shed light on the financial performance of the homeowners’ market in the coastal states. Indeed, most experts believe that insurers have under-priced property insurance historically in states prone to hurricanes, in part because of models that underestimated catastrophe risk, but also because of government rate suppression. This is reflected in insurers’ negative long-term earnings on property insurance in high-risk states, such as Florida.
"Policyholders need to know their insurance companies will be there when there are claims because of natural catastrophes. The continued financial strength of the insurance industry assures this will be the case.”
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Posted: Thursday, January 10, 2008 12:00:00 AM. Modified: Thursday, February 28, 2008 2:27:39 PM.
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