|Author||Subject: What Ralph Nader thinks about the insurance industry|
|Kay|| Posted At 01:08:38 07/24/2000
This was written by Ralph, the Green Party presidential candidate, who is NOT FOR SALE.
April 06, 1999
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Does the insurance industry really need another free ride?
By Ralph Nader
The insurance industry continues to live a charmed existence in
state and federal legislative halls.
Even banks -- no slouches at using corporate money and muscle to
gain legislative favor -- appear incompetent when compared with large
insurance companies that regularly escape regulations designed to
protect the public.
Adequate credit on reasonable terms is often the lifeblood of many
communities. Equally important is insurance. You don't build homes,
operate small businesses, or buy automobiles without insurance.
Thirty years ago, the President's National Advisory Panel on Insurance
in Riot Affected Areas stated:
"Insurance is essential to revitalize our cities.... Without insurance,
banks and other financial institutions will not -- and cannot -- make
loans;... housing cannot be repaired;... efforts to rebuild our nation's
inner cities cannot move forward.... Communities without insurance
are communities without hope."
The Home Mortgage Disclosure Act (HMDA) -- a law adopted nearly a
quarter of century ago to combat redlining of low- and
moderate-income and minority neighborhoods -- requires banks to
make annual reports of where they make mortgage loans. The law has
helped move credit into underserved rural and urban areas and to
detect discriminatory lending patterns.
In 1993 the House of Representatives passed legislation to extend
HMDA-type reporting to insurance companies, but the insurance lobby
rolled out the big guns in the Senate and prohibited the legislation from
being considered by the Senate Banking Committee. Later, in 1996, big
insurance companies maneuvered behind the scenes to scuttle a
proposal by the National Association of Insurance Commissioners to
conduct an industry-wide study of redlining.
Financial deregulation legislation now pending in Congress (H.R. 10)
provides a great opportunity to extend an HMDA-style antiredlining
requirement to insurance companies. But the House and Senate
Banking Committees have ignored or dismissed the issue.
Amazingly, deregulation legislation is moving forward in both the House
and Senate with provisions that will allow insurance companies to form
and become members of federal financial holding companies -- without
being subject to safety and soundness regulations by any federal
According to the pending legislation, insurance companies would
continue to be regulated -- if that term can be used -- by 50 separate
state insurance departments, most of which are understaffed,
underfunded, and far too often influenced by the industries they monitor
and supervise. The Federal Reserve -- which would serve as an
umbrella regulator of holding companies -- would be prohibited from
examining or setting capital standards for insurance company
subsidiaries. Even the interpretation of regulations would be left solely
to the states. Only in extraordinary circumstances could the Federal
Reserve intervene in the machinations of an insurance company to
prevent collapse of a holding company.
A few years ago a congressional report evaluating state insurance
regulation found a number of weaknesses in this system including lack
of coordination and cooperation, infrequent examinations based on
outdated information, insufficient capital requirements and licensing
procedures, failure to require independent audits and the use of
actuaries, and improper influence on regulators.
Even in the handful of states where insurance departments are
reasonably funded and staffed, the emergence of thousands of
companies that do business across state lines, as well as in overseas
markets, would make it impossible for a single insurance department
to monitor and assess risks. Adding to the difficulty of tracking the
financial health of insurance companies is the growing complexity of
Why is this important to taxpayers? Because many of these insurance
companies are big enough to compromise an entire financial holding
company should they fall on bad times. If that should occur, taxpayer
dollars may be used to bail them out.
H.R. 10 is becoming another sad example of the insurance industry's
influence over state and federal legislators. As Congress seeks to
deregulate the financial industry, insurance companies have taken a
prominent position in trillion-dollar business that could dominate the
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Re: What Ralph Nader thinks about the insurance industry (Currently 0 replies)
Posted At 09:50:56 07/24/2000
Here's just a few examples of insurance company fraud and corruption.
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