Americans for Insurance Reform (AIR) is a national coalition of public interest organizations that support effective reforms of the property/casualty insurance industry to control skyrocketing insurance rates, reduced insurance coverage, arbitrary policy cancellations, mismanagement and other insurance industry abuses.
AIR is a project of the Center for Justice & Democracy at New York Law School . (Endorsement of AIR does not imply endorsement of other Center for Justice & Democracy programs.)
AIR Coalition Members
We all depend on reasonably priced insurance to live safe and healthy lives. Yet because of scant oversight of insurance industry activities, insurers can impose rate hikes that are so astronomical that they threaten the ability of businesses and professionals, homeowners or motorists to function.
Three times in the last 30 years, the insurance industry has created liability insurance "crises," making insurance unaffordable or, in some cases, unavailable at any price for many businesses, professions, homeowners and others. A crisis happened in the mid-1970s, precipitating the first wave of "tort reform" in medical malpractice insurance and product liability insurance, particularly.
A more severe crisis took place in the mid-1980s, when most liability insurance was impacted. At that time, manufacturers, municipalities, doctors, nurse-midwives, day-care centers, non-profit groups and many other commercial customers of liability insurance were faced with insurance rate increases of 300 percent or more. Many could not find coverage at any price. Another crisis hit in 2002, with the country again experiencing what has become known as the "hard market" part of the cycle, this time impacting property as well as liability coverages, with medical malpractice lines of insurance seeing rates going up 100% or more in some states. Insurers have requested large health insurance rate increases as well. Beginning in 2006, rates began to stabilize once again. Now, insurers are starting to force the nation into a new "hard market."
What precipitates these crises is always the same. Insurers make their money from investment income. During years of high interest rates and/or excellent insurer profits, insurance companies engage in fierce competition for premiums dollars to invest for maximum return. More specifically, insurers engage in underpricing and insure very poor risks just to get premium dollars to invest. But when investment income decreases because interest rates drop, the stock market plummets and/or cumulative price cuts make profits become unbearably low, the industry responds by sharply increasing premiums and reducing coverage, creating a "liability insurance crisis."
Each time rates begin to skyrocket, the insurance industry tries to cover up its mismanaged underwriting by blaming lawyers and the legal system. Under this theory, one would have to believe that jury verdicts or trial lawyers have timed their "aggression" to precisely coincide with the insurance industry’s economic cycle, so that the aggression impacts just when the market turns hard. In other words, one would have to accept the notion that lawsuits and juries were "aggressive" in the mid 1970s, then non-aggressive for a decade, then aggressive in the mid-1980s, non-aggressive for 17 years, aggressive again for the next five years, non-agressive for several more years, and aggressive once again. This is ludicrous.
Here’s Why You Should Care:
Insurance companies are spending big money and exerting all their influence on state and national legislators to change our legal system rather than focusing on real reforms of the insurance industry. Insurance reform is the only way to control mismanaged underwriting and the cyclical nature of the insurance business.
Insurance companies say, falsely, that we must make it even harder or impossible for Americans to use our civil courts, in order to bring down insurance rates. This is wrong. Restricting legal rights, while having terrible consequences for many innocent people, will do nothing to improve the affordability of liability insurance.
The largely unregulated and anti-competitive insurance industry is responsible for the premium-gouging which businesses, professionals and individuals experience. There is only one way to solve this problem -- reforming the insurance industry, not the civil justice system.
Here’s What We Support:
We support insurance industry reforms that will help control the insurance industry’s economic cycle that inevitably leads to price-gouging of policyholders. We support reforms that systematically address the tactics of the insurance industry, which consistently looks for scapegoats, including lawyers and the legal system, to cover up its mismanagement and the results of it’s own economic cycle. These insurance reforms includes:
Meaningful Insurance Disclosure Laws. States must enact laws and regulations so that public officials making policy decisions and legislative choices have information on payouts, losses, income and reserves to determine the true condition of the insurance industry and how victims are faring under the present system. Congress should also set minimum disclosure standards for surplus lines and reinsurers operating in the United States.
Strong State Authority Over Rates and the Participation of an Effective Insurance Consumer Advocate. State insurance departments must take a far more active role in controlling insurance rates. At a minimum, departments should be given more authority to approve or reject rate requests, or to advocate the rollback of insurance rates. In addition, states should establish a consumer advocate in the Insurance Commissioner’s office to participate in rate hearings and to monitor insurance industry waste, inefficiencies and price-gouging.
Repeal of the Insurance Industry’s Anti-Trust Exemptions. A law repealing the insurance industry’s federal anti-trust exemption (McCarran-Ferguson Act) would ensure that all domestic and foreign insurers and reinsurers that do business in the United States are subject to federal anti-trust prohibitions applicable to other industries. In addition, states should repeal anti-group laws, as well as anti-rebate laws that prohibit insurance agents from offering discounts to policyholders.
Center for Justice & Democracy
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