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WASHINGTON--Insurers say a Consumer Federation of America study concluding that the property/casualty insurance industry is "systematically overcharging for insurance and shifting costs to consumers and taxpayers" mischaracterizes the industry's performance.
"Unfortunately, a major reason why insurers have reported record high profits and low losses in recent years is that they have been methodically overcharging consumers, cutting back on coverage, underpaying claims, and getting taxpayers to pick up some of the tab for higher risks," said J. Robert Hunter, the CFA's director-insurance in a statement accompanying release of the white paper.
The white paper also concluded that insurers have received a taxpayer subsidy through the federal government's terrorism insurance backstop, which the CFA has consistently opposed and which is slated to expire at the end of this year.
In a statement responding the CFA charges, Marc Racicot, president of the Washington-based American Insurance Assn., said: "After record losses in 2004 and 2005, the respite provided by 2006 has meant that insurers could replenish the capital that they must have on hand in order to stand behind the policies they sell. Healthy balance sheets better prepare insurers to face future catastrophes and greatly benefit consumers."
Mr. Racicot also disputed the CFA's contention that the terrorism insurance backstop represents poor public policy.
"Unfortunately, CFA simply refuses to understand that terrorism risk today essentially is equivalent to war risk, making it wholly uninsurable by the private sector alone," he said in his statement. "A public-private partnership is needed to deal with terrorism losses that could be virtually infinite in scope, particularly if an attack involves chemical, nuclear, biological or radiological weapons."
Mr. Racicot noted that there "is broad, bipartisan agreement on Capitol Hill, and broad consensus among policyholders, that a long-term national terrorism insurance program is critical to the ongoing economic security of this country."