THE RATE GAME: A STACKED DECK AGAINST THE POLICYHOLDER.

One of our organization's goals is to lower rates for all policyholders in order that there is a legitimate relationship between the coverage you receive and the price you pay. Pretty simple stuff, right?

Imagine our surprise when we began to ascertain and calculate the expense of hundreds of rate challenges our group was ready to file. Simply put, a rate challenge is filed by a group if such a rate hike is known to be unjustified and only after an insurance company files for a rate increase.

While the specific code (or statute) may vary from state to state, they all work about the same and are usually governed by the Insurance Code as well as Administrative Procedure Act.

A CASE STUDY

A few weeks ago, Mid-Century, an auto insurer under the Farmers umbrella, decides to file for a rate increase of close to 10% over its already exorbitant rates.

We get busy and start investigating the process and find that there are a number of steps that we can take to challenge the rate increase. The first step is easy. We must file a written protest of the rate increase. After that, it gets sticky, expensive and all of our work would most probably be thrown out because of the anointed insurance industry lobbyist we call the Commissioner.

Basically, the rules mandate that a trial occurs, complete with discovery, expensive experts, actuaries, statisticians and a judge. Even if successful, the Commissioner has the authority to overrule the judge and in most state, given the propensities of the Commissioners, this would be a likely outcome.

The tab? Approximately $50,000 per rate increase and there are an ungodly number of these individual increases filed in each state. And the kicker is that, assuming we are successful in our challenge, our costs are not recoverable.

The entire shame is a farce and is structured so that NO ONE dare file such an objection.

Who is to blame? Your Insurance Commissioner and legislators who made the rules. Remember that the next time you are asked to vote.

11/19/03

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