Northern Virginia and Washington D.C. Medical Malpractice and Personal Injury Lawyers’ Blog

Is Insurance Company Greed The Reason For Higher Premiums?

Advocates for tort reform consistently claim that lawsuits are the reason that Americans face increasing insurance premiums.  This claim has consistently been refuted by statistics that prove the number of lawsuits filed in the United States have been decreasing over the last 20 years, and that jury verdicts in favor of injured people have not been increasing over the last 20 years.

Now, there is additional proof that lawsuits have nothing to do with the increase in insurance premiums charged by the insurance companies.  J. Robert Hunter in his study entitled "Property/Casualty Insurance in 2008: Overpriced Insurance and Underpaid Claims Result in Unjustified Profits, Padded Reserves and Excessive Capitalization" discovered that insurance companies are paying 20% less in benefits to its own insureds now as compared to 20 years ago.  He also discovered that insurance companies have earned unprecedented profits in each of the last four years, which is remarkable in the aftermath of Hurricane Katrina and the Florida hurricanes.  Mr. Hunter concludes that the property/casualty insurance industry has been highly effective in maximizing profits through rate increases, coverage reductions, inappropriate claims practices and by shifting high risks onto taxpayers.

Of note, Mr. Hunter was a former Texas insurance commissioner charged with ensuring that insurance rates are fair, and that insurance companies are financially stable and able to pay claims as promised.

Anecdotal support for Mr. Hunter's findings can be found in Allstate Insurance Company's long-standing refusal to comply with court orders demanding the production of the "McKinsey documents", which allegedly show how the company profited at policyholder's expense.  In an effort to protect these documents from production, Allstate Insurance has incurred millions of dollars in fines.  Recently, the Florida Insurance Commissioner went so far as to ban Allstate from writing new insurance business because of its refusal to produce documents or testimony to clarify its procedures for paying claims.