Consumers Pay Record Amounts For P/C Insurance, Advocate Says

May 17--State regulators are taking it too easy on insurance companies, a consumer group says.

That's certainly not the narrative you'll hear from the insurance industry. But Americans paid a record amount for property and casualty insurance in 2013, $478 billion in earned premiums, and it's excessive, argues the Consumer Federation of America.

"The data make it indisputably clear that insurance companies are overcharging their customers in order to rake in huge profits," said J. Robert Hunter, the group's director of insurance and a former consultant to Florida regulators.

Property and casualty insurers are sitting on a record surplus of $653 billion, the largest even after adjusting for inflation, Hunter said. Pre-tax income in 2013 was $64 billion -- only 2006 and 2007 had higher profits, by his count.

Fair profits are fine, Hunter said. But he finds it "unacceptable for insurance companies to be squeezing so much profit out of consumers who are required by laws and financial institutions to buy coverage."

Low- and moderate-income Americans struggle to afford auto insurance, he said, and many homeowners in states like Florida find property insurance takes a bigger bite from the family budget than they bargained for.

"Huge profits like those realized in 2013 raise serious questions about the adequacy of state regulation of insurance," Hunter said.

In rebuttal, an industry-funded organization says there's a problem with picking good years to complain about profits and forgetting about bad years.

"The point is that profits and profitability in the property-casualty insurance industry are highly volatile-- exactly what you'd expect in an industry that bears risk from every catastrophe wherever and whenever they occur," said Bob Hartwig, president of the Insurance Information Institute in New York.

If profitabilty was about 10 percent in 2013, it's worth remembering it was nearly zero in 2008 during the financial crisis, Hartwig said.

"A profitable insurance industry is a financially strong, stable and sound insurance industry--one that millions of policyholders every year can count on to pay their claim in their time of greatest need," he said.

Such debates can seem like an academic exercise at times, because insurance is often regulated at the level of individual companies operating in a particular state. Regulators approve, or don't, highly technical filings that can run hundreds of pages.

But there's evidence a little public attention on such topics can matter. Consider the property insurance market in Florida. The state's chief financial officer, Jeff Atwater, sent a letter asking insurance commissioner Kevin McCarty</person> why rates heading into 2014 were not coming down if a key cost for insurers -- reinsurance that helps pay claims after bad storms -- was falling sharply.

McCarty said his office would work to make sure such changes were "appropriately reflected in homeowners rates."

Coincidentally or not, several insurers decided to refile rates. By January, about half the state's top 30 insurers had filed for rate decreases, from 0.1 percent to 9.3 percent.

That's welcome, though by a big margin, Floridians still pay more for home insurance than anybody else in the country, according to the latest number from the National Association of Insurance Commissioners.

And car insurance in Florida might benefit from heightened public scrutiny too. A 2012 law pushed by Gov. Rick Scott reduced the benefits insurers must pay in Personal Injury Protection claims, but 12 of the state's top 20 carriers raised overall rates for 2014, records show.

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