Insurance Rates: Georgia’s Undesirable Claim to Fame

Atlanta from Piedmont Park

While Georgia’s Bulldogs were having a “peach” of a year in 2017 with 13 wins and only 2 losses, the Peach State had a reoccurring record with insurance rates they wish they could get rid of. According the Atlanta Journal-Constitution reporter James Salzer as filed in the Atlanta News June 20, 2015, and updated in 2017, Georgia was second in overall automobile rate increases in the United States in 2013 and took the honors of being first in overall rate increases in 2014, repeated in 2015, 2016 and again in 2017. Some insurers have had filed and approved rate hikes of two per year. These rate increases have the buying public asking the question, what is the Insurance commissioner doing to monitor these occurrences?

It is reported by Steve Manders, a top staffer in the commissioner’s office, that he has been given authority to allow rate increases up to 10% before the commissioner Mr. Hudgens is even notified. With this being the case, the Atlanta Journal–Constitution studied years of campaign contributions made to Commissioner Ralph Hudgens to measure what share of the commissioner’s contributions came from those with ties to industries that Hudgens regulates. Unfortunately, the article does not give results of that study. Perhaps a follow-up article by Mr. Salzer, who has greater investigative skills than I, would reveal his findings.

These rate increases are coming on the heels of stable premiums–and in some cases years when insurance companies were implementing rate cuts. In fact, Georgia’s average auto premiums declined slightly between 2008 and 2012, when it was in line with the national average according to data compiled by National Association of Insurance Commissioners.

In an attempt to justify rate increases, the industry falls back on the old trite argument that underwriting losses outweigh rate increases. Supposedly Georgia’s insurers are dealing with a rash of natural disasters which now have forced long avoided rate hikes. They also say due to improved economy more commuters are back on the roads leading to more crashes, injuries, and lawsuits. Some of that argument could be valid, but some other forces are also at work in these rate increases. How about closer monitoring of claim procedures by insurance companies, i.e. stricter scrutiny of “assignment of benefits” (AOB’s) where contractors require insureds to allow them to coordinate materials and time with repairmen to complete a job without the insured being involved. Contractors say it is a convenience to the insured to not have to review work estimates. It may be time to review “preferred body shop” status established by some insurance companies which could open up competition for repairs to be done. It is difficult for new businesses to compete when a large majority of business is going to an already established business. In my 42 years of experience in the casualty business, I saw only one new shop break into the group of body shops giving estimates in our town. This may have to do with the high start-up costs, but some of it can be attributed to the “preferred shop” designations. How about better common sense use when dealing with marginal claims? What I mean by that is, look at the economy of scale to determine if spending $1000 to close a claim, as opposed to spending $2000 to argue the validity of a claim, wouldn’t be the better route. Insurance commissioners could enact stricter penalties for those who want to pursue a fraudulent claim so there is more at risk for those who want to sue just for suing’s sake.

Revise the position of the insurance commissioner from one of election to one appointed by legislature. This would get rid of the potential of needing to return a favor for a vote. If this isn’t feasible, require the commissioner to establish a board of consumers to review requests for rate increases along with the established office staff. Public awareness helps to get the attention of an industry when what they are proposing is going to affect that group of consumers.

How should the buying public feel regarding rate increases which seem to be unwarranted?

“They should be upset,” said J. Robert Hunter, the Consumer Federation of America’s Director of Insurance and former Texas Insurance Commissioner. “Obviously, the government is not protecting them.”

the ask the question, “Is the insurance commissioner on the hot seat or can he turn it around?”

This year it would be nice for the insurance companies to put away their standard rate increase form letter and give us something besides just the change of date from last year to this. Wouldn’t that be just “peachy?”

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