Taking Aim at Insurance Company Gouging

We all pay for it – for our lives, health, home, and automobiles. If we add it all up, paying for insurance takes a huge bite out of our earnings and every year that bite seems to be getting bigger while the benefits of coverage are shrinking. It isn’t your imagination. The insurance industry is racking up record profits and paying less in claims.

Recently, the Consumer Federation of America (CFA) accused the country’s largest insurers of “gouging” the public on their way to an estimated combined after-tax profit of nearly $60 billion in 2006, up from a record in 2005 of $48.8 billion, which shattered the 2004 record of $40.5 billion. Meanwhile, the amount of premiums being paid out to insureds for claims has dropped from about 75% in the late 1980’s to 60%.

To add insult to injury, the federal government has subsidized the insurance industry to the tune of about $7 billion under the Terrorism Risk Insurance Act. The CFA is urging Congress to let the Act expire at the end of this year.

The insurance industry often cites trial lawyers and the clients we represent as the source of rising premiums. Clearly, this is not the case. The apparent cause of rising premiums, at least as far as homeowners’ and auto insurance is concerned, is greed and the unchecked power of big insurance companies. This may be good for shareholders, but it is an increasing burden on the middle class and a problem that needs to be addressed through tighter regulation.

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