Insurance Quotes & Advice

In my last article I talked about the bad reputation the insurance industry has been getting lately.  Business practices that have made them popular on Wall Street has earned them no love from the rest of the public.  Well it looks like consumers are getting fed up and are starting to fight back. 

Here in this article from automotive.com, a consumer advocacy group from California, “The Foundation for Taxpayer and Consumer Rights” is challenging Allstate Insurance in hearings before state regulators.  They are arguing that Allstate is overcharging the state’s consumers by over $300 million, citing the profit levels that the company has reported over the last few years. 

Allstate has in return made thinly veiled statements claiming that if forced to lower their rates then they would either have to lower the quality of their service or even leaving the auto insurance market in the region entirely.  Of course seeing as how they have already left the property insurance market in the state, in an effort to increase their profitability, this is no idle threat.

It’s good to see the little guy try to fight back for a change.  While this is just one case of exorbitant pricing by a company, insurance costs have been rising in general, far outpacing the inflation rate.  Where I live in Massachusetts, state regulators set the auto insurance rates for companies here, but it’s still one of the highest premiums in the country. 

Maybe there just isn’t enough competition anymore and it seems that there is less of it as more and more companies merge in this day and age.

Hurricane Katrina happened 2 years ago but insurance companies are still feeling it’s effects to this day.  They have faced sharp criticism from government officials, the media and consumers in their handling of the disaster.  The industry still faces thousands of lawsuits for denied claims stemming from the much publicized “wind vs. water” debate.

Wednesday marked the first verdict in a federal trial in Louisiana where jurors ruled against State Farm Insurance for denying a claim from that storm.  While the case shouldn’t have an impact on the other lawsuits against the industry, it could be the first of many defeats it could likely face.  These cases in general could have a large effect on how premiums will be determined in these high risk coastal areas in the future and whether some companies will even do business there at all.

All State Insurance has already started a strategy of leaving high risk states and has been lambasted for it.  They have been criticized by some for avoiding selling insurance to people who actually need it and only selling it to those who don’t.  Needless to say the move was widely lauded by analysts on Wall Street.

Government regulators have also increased their general scrutiny of the industry and have imposed tighter guidelines on their capital structures so that they can remain solvent if another such costly event takes place.  However with the industry recording very sizable profits since the disaster took place, it is garnering little public support in its hard stance against devastated homeowners from the region.

Barring anymore major catastrophes, 2007 will be another profitable year for the insurance industry.  The industry being risk averse by it’s very nature has been hurt far less than other industries in the financial sector, in the wake of the meltdown in the sub prime mortgage market.  Experts also say that even with the losses from the recent California wildfires it has been a slow year for disasters overall.

Those big profits won’t mean you will be paying less for your premiums anytime soon, although it has slowed premium growth for the time being.  This has been especially good news for the people that live in the states of the gulf coast region which had seen  a sharp increase in their premiums in recent years. 

Most of these profits will be reinvested back into the industry to bolster its claims paying capacity, much to the delight of government regulators.  Since the Hurricane Katrina disaster and it’s $41 Billion in payouts, companies have been required to strengthen their claims paying resources and capital positions.

Some industry analysts are concerned however and warned that much of the profits have come from investment gains rather than underwriting income.  But then again consumer advocacy groups would probably be up in arms if there was a huge disparity between premium revenue and claims payouts.