New Study: Americans Pay More for Weather Catastrophes as Insurers Increasingly Shirt Costs to Consumers and Taxpayers
The Consumer Federation of American (CFA) today released a new study with insurance industry data that found that insurance companies have significantly and methodically decreased their financial responsibility for weather catastrophes like hurricanes, tornados and floods in recent years, shifting much of the risk and costs for these events to consumers and taxpayers. The report is being released as insurers in eleven states have requested large homeowners’ insurance rate increases of 18 percent or more. These states are Alabama, Arizona, Colorado, Georgia, Kansas, Kentucky, Maine, South Carolina, South Dakota, Tennessee, and Virginia.“Insurance commissioners should block many of these pending rate increases because they place an unwarranted financial burden on homeowners, many of whom are coping with severe financial difficulties in a bad economy,” said J. Robert Hunter, CFA’s Director of Insurance and former federal insurance administrator and state insurance commissioner. “In the last twenty years, insurers have been so successful at shifting costs to consumers and taxpayers that they are currently overcapitalized and cannot justify higher homeowners’ rates.”Insurance executives frequently remind the public and regulators of the frequency and severity of catastrophic events. CFA’s study, “The Insurance Industry’s Incredible Disappearing Weather Catastrophe Risk,” found that some of the savings insurers have achieved are legitimate, the result of the use of reinsurance and wise risk diversification strategies.However, the study found that the bulk of the savings that insurers have realized has been through shifting costs to taxpayers and consumers. Insurers have hollowed out the coverage they offer to homeowners by increasing deductibles and capping the amount they will pay if the home is damaged or destroyed. These coverage reductions expose taxpayers to higher disaster assistance payouts because homeowners have less money available to help themselves. Additionally, insurers have significantly raised rates over the years, sometimes using questionable computer rate “models” developed by other companies. Insurers have also used fine print tricks, such as the “anti-concurrent causation clause,” which allows insurers to refuse to pay for wind losses if any flood damage occurs at about the same time, even if the wind losses occurred first. Finally, insurers have shifted coverage for homes in high-risk areas to state insurance pools.
The U.S. Housing Market: Current Conditions and Policy Considerations (PDF)Source: Federal Reserve Board
The ongoing problems in the U.S. housing market continue to impede the economic recovery. House prices have fallen an average of about 33 percent from their 2006 peak, resulting in about $7 trillion in household wealth losses and an associated ratcheting down of aggregate consumption. At the same time, an unprecedented number of households have lost, or are on the verge of losing, their homes. The extraordinary problems plaguing the housing market reflect in part the effect of weak demand due to high unemployment and heightened uncertainty. But the problems also reflect three key forces originating from within the housing market itself: a persistent excess supply of vacant homes on the market, many of which stem from foreclosures; a marked and potentially long-term downshift in the supply of mortgage credit; and the costs that an often unwieldy and inefficient foreclosure process imposes on homeowners, lenders, and communities.
Looking forward, continued weakness in the housing market poses a significant barrier to a more vigorous economic recovery. Of course, some of the weakness is related to poor labor market conditions, which will take time to be resolved. At the same time, there is scope for policymakers to take action along three dimensions that could ease some of the pressures afflicting the housing market. In particular, policies could be considered that would help moderate the inflow of properties into the large inventory of unsold homes, remove some of the obstacles preventing creditworthy borrowers from accessing mortgage credit, and limit the number of homeowners who find themselves pushed into an inefficient and overburdened foreclosure pipeline. Some steps already being taken or proposed in these areas will be discussed below.
Guide to Navigating the Auto Claims’ Maze: Getting the Settlement You Deserve (PDF)
Source: Consumer Federation of America
You’ve just be involved in a fender bender with another vehicle. Your car is damaged but drivable. Your neck and back are a little sore and you were not at fault for the accident. This scenario takes place countless times each day across the country. You’re now faced with important decisions and many questions. Should I make a claim through my insurance company or should I try to make a claim through the other driver’s insurance company? How am I going to get my car repaired? What if I need a rental car while mine is in the shop? Who is going to pay for my doctor bills if I have my sore neck and back checked out?
With the current financial markets making it difficult for insurance carriers to earn a good return on the premium dollars you pay, these companies have increased the pressure they place on their claims’ departments to pay out less in claims’ dollars and expenses than they are earning in premium payments. Regardless of whether you decide to file a claim with your company or the other driver’s insurer, remember that the only way a claims’ department accomplishes this goal of making an “underwriting profit” is to pay as little as they can on each and every claim. In other words, do not be surprised if the insurance company offers you less than you think you need to pay for effective repairs or thorough medical treatment. By carefully following the recommendations in this report, you will increase your chances of getting the insurance company to offer you a fair settlement.
Hat Tip: PW
2010 Consumer Complaint Survey Report (PDF)
Source: Consumer Federation of America, National Association of Consumer Agency Administrators, North American Consumer Protection Investigators
- As in the last survey, complaints about credit and debt are second only to auto-related complaints in the top ten. Fraud is a new category in the top ten.
- No single type of complaint stood out as the fastest-growing or worst in 2010. The complaints that state and local consumer agencies received last year ran the gamut from auto sales to sweepstakes scams. Many of the complaint examples that agencies provided, however, were related to the difficult financial situations that consumers and businesses faced.
- New types of complaints included problems with group discount coupons, medical billing, companies offering to buy consumers’ cars, “recovery services” that falsely promise to retrieve money that consumers have lost to timeshare resale companies, massive data breaches, billing disputes spanning many years, the “grandparent scam,” tax-related scams, massive data breaches, and wireless TV contracts.
- The agencies surveyed received more than 252,000 complaints in total last year and collectively obtained in excess of $208 million in restitution and savings for consumers.
- Half of the agencies that responded to the question about their biggest challenge last year cited budget cuts and limited resources, which often forced them to “do more with less.”
New Survey Reveals What Consumers Know and Don’t Know About Changing Credit Score Marketplace (PDF)
Source: Consumer Federation of America
This morning, the Consumer Federation of America (CFA) and VantageScore Solutions released survey findings revealing that most consumers are not aware of recent changes in the credit score marketplace. On 22 questions administered by Opinion Research Corp. to over 1000 representative Americans late last month, on average consumers answered 60 percent correctly, but most did not know who makes credit scores available, what is a strong score, and what’s the financial cost of a poor score.
There are a growing number of both generic and lender-specific credit scores, few of which are identical. Even generic scores may vary widely depending on both the credit report and scoring system used. For instance, scores based on credit reports from one of the three main credit bureaus — Experian, Equifax, and TransUnion — may utilize either of the two main scoring systems — FICO with its range of scores from 300 to 850, or VantageScore with its range from 501 to 990.