I had to laugh when I saw our feckless Insurance Commissioner Mike Chaney tap dancing his way around Harlan Kirgan at the Mississippi Press defending the latest rate up his office has given State Farm. The story also gives me a chance to weave in some other news and perhaps show case the intellectually bankrupt ideas regarding free markets espoused by our big insurance lovin’ Commish. Let’s begin with the piece that appeared Wednesday in the Mississippi Press:
Mississippi Insurance Commissioner Mike Chaney said he was not happy about granting a 19.5 percent homeowners rate increase to State Farm, but he had little choice.
“Would you want me to have 26,000 policies canceled on the Gulf Coast with nobody to write coverage for those 26,000 people?” Chaney asked.
He announced on Nov. 30 that he had approved the rate increase for State Farm Fire and Casualty Co. on homeowners insurance in Jackson, Harrison and Hancock counties.
In a statement, Chaney said the rate increase balanced the need for “affordable rates and sustainable premiums in face of rising costs to companies.”
Rising costs to the companies? Only in Mr Chaney’s world as Jim Brown explained yesterday in his column:
Hurricane season just ended with no storm activity. Cost of insurance is dropping all over the gulf south. Florida’s average property insurance rate dropped, according to Governor Charlie Crist, by 16%.
We’ve had 4 straight Hurricane seasons with little activity outside of Ike and Gustav in 2008 yet Mr Chaney claims their costs are climbing. He is right that costs are climbing in Mississippi mainly because he keeps granting his buddies in Bloomington and Northbrook large rate ups. But it gets more clownish from here as our Commish is an unabashed advocate of free markets. Classic economics says that when a market void is present it will be filled by new entrants to the marketplace. That is exactly what happened in Florida when State Farm threatened to leave as new entrants to the insurance market there snapped up escapees from the Farm as quick as they could cancel. Evidently Mr Chaney does not believe Mississippi has a viable insurance market as we continue with the Mississippi Press story:
“It’s basically an issue of trying to balance the ball and tap dance on the razor blade,” said Chaney. “People want to say, ‘kick them out,’ but you’d better think about 26,000 people having no coverage.”
After the rate increase, which takes effect in January, a State Farm spokesman said the company plans to drop wind insurance from as many as 1,800 policies.
Allstate Corp. has a request for a 65 percent rate increase on homeowners policies pending, but Chaney said, “You can rest assured that is not going to be approved.”
Allstate’s request cites reinsurance costs and lower investment income among other factors, he said.
“I’m just not going to let them do it,” he said. “It is just that simple.”
Chaney sang the same ol’ lying song with State Farm that he now sings with Allstate. Of course he is going to grant Allstate a big, fat rate increase. I think only Dave Vincent at WLOX is the only person on the coast gullible enough to believe the commish this time as we continue:
Chaney said a public hearing on the Allstate request may be held in January.
And I’ll note Chaney promised to hold rate hearings for State Farm down here on the coast but that must have only been a personal opinion, kinda like that broken campaign promise to work to make his office appointed that later became just a personal opinion. as we continue his jackassery.
There are no easy solutions for property insurance on the coast, Chaney said.
“Property insurance on the coast will always be a struggle for me for the next several years until we can figure out a way to get it available and affordable,” he said. “It is an issue I take very seriously because it affects economic recovery on the coast.”
Chaney said insurance commissioners are discussing remedies to the rising cost of insurance.
“We are working together,” he said.
You would think 4 years would be enough, after all we gave the insurers everything they asked for in strong building codes and a strong flood mitigation program. The legal system has pretty much reaffirmed existing case-law regarding the insurance disputes yet there are still problems. Could it be that electing a representative of the insurance industry as our head regulator might have something to do with this? And speaking of Mr Chaney’s fellow band of captured regulators we did indeed note the commishes are working together, just not on behalf of consumers. Rather they have finished crafting the regulatory standard that allows insurers to count deferred income taxes as capital available to pay claims. Of course I’d like to see a consumer fix a house with deferred tax assets after a tornado destroys it but the Commishes are evidently too busy to worry with such trivialities as we let the Wall Street Journal explain:
Under the measure, insurers will be able to count more of the so-called deferred-tax assets as part of their capital cushions.
As with some of the other changes they have approved, regulators put their stamp on the income-tax-accounting measure. The NAIC approved a less-generous version of the change sought by the trade group, and the group put “guard rails” in place, as some regulators dubbed it, to restrict use of the more-favorable treatment to the healthiest insurers.
Consumer groups have complained that these are paper assets that won’t help pay claims if companies hit the skids.
On a related note the commissioner from New Hampshire, Steve Sevigny issued a statement that was included on the NAICS press release that frankly left us scratching our heads. Mr Sevigny is evidently content to take financial risks with the claims of the residents of New Hampshire:
“Insurance regulators have long understood the need for conservatism in insurer’s financial statements as evidenced by our current conservative reserving requirements, disallowance of assets for acquisition costs and non-admission of many other assets,” said Roger Sevigny, NAIC President and New Hampshire Insurance Commissioner. “This change recognizes that fact, but also recognizes that overconservatism can actually be detrimental to consumers.”
Consumers are taking a different direction going so far as to sue AIG to keep then from draining their capital from California. What a study in contrasts with the NAICS content to allow shady bookkeeping while consumers are suing out of fear there will be no money to pay their claims. Simply put consumers aren’t buying into this latest NAIC sanctioned scam:
Lawyers in California asked a judge on Thursday to bar the American International Group from transferring money out of the state for 90 days, out of concern that the company may not have enough readily available assets to back its policies, as required by law.
The request for an injunction came from a policyholder, Linda M. Harris, who is also a financial planner and who recommended A.I.G.’s annuities to her clients long before the insurance company’s government rescue last fall. She filed suit earlier this year, saying she had unintentionally put people into long-term investments that had proved riskier than she understood. Now she wants to make sure A.I.G. can pay in the long run……
Of course, AIG, despite being insolvent and deeply in debt to the taxpayers who bailed them out is denying everything. Michael Aguirre, one of the lawyers for Ms Harris nails it and the uselessness of the state regulators when it comes to regulating global financial services companies in the 21st century.
State laws in California and elsewhere require all insurers to estimate their future claims and set aside enough assets to honor them. If they do not, state commissioners have the authority to step in and correct the breach.
But Michael J. Aguirre, one of the lawyers for Ms. Harris, said the state legal framework alone was not enough to protect policyholders because no one — at either the state or the federal level — was regulating A.I.G., the holding company.
And it is the holding company that has been orchestrating the movement of money among the individual insurance units, Mr. Aguirre said.
The motion cited a number of those activities, including off-balance-sheet investment pools, unsecured promises by related entities to backstop one another’s claims, and reinsurance agreements meant “to portray a sound financial picture.”
With this bunch in charge at NAIC consumers best stock up on more vaseline.