Insurance Rates Spiral Up in Wake of Sept. 11 ; Industry Seeks Federal Backing, Saying It Could Cover Only 20 Percent of Another Attack
Abraham McLaughlin writer of The Christian Science Monitor, The Christian Science Monitor
Everyone from commuters to school kids is paying a price for rising insurance costs - due in part to the recent spike in terrorism-coverage rates.
It's a subtle ripple-effect of Sept. 11. For example:
* Tolls on San Francisco's Golden Gate Bridge may jump from $3 to $5, in part because, starting today,the span's insurance costs $1.1 million a year - more than double last year.
* Airline passengers, who used to pay two or three pennies toward terrorism insurance each trip, will soon be paying about 70 cents - though that's far less than the $2.25 that had been expected.
* Lease rates - and thus retail prices - could jump at Minnesota's Mall of America because owners had to buy a terrorism policy covering $100 million in potential damages for an undisclosed price.
* Forty high-schoolers in Roxbury N.J., had to cancel a study- abroad trip to Australia this summer because their school couldn't find travel insurance that covers terrorism.
Today President Bush is set to meet with insurance executives, labor leaders, and others to push Congress to address these problems with a federal safety net for Americas' insurance firms. Supporters of the safety net argue that Uncle Sam's backing would stabilize the insurance, commercial real estate, construction, and other industries - thus boosting the economy.
Others say the insurance industry is in far better shape than many expected after Sept. 11 and doesn't need federal support. They say federal backing will create a virtual welfare program for insurance firms. One possible effect: softening vigilance in mandating that structures they insure are terror-proof. This could weaken America's safety in the event of another attack.
Despite dire predictions about the industry after Sept. 11, "Lo and behold the sky didn't fall," says Travis Plunkett, of the Consumer Federation of America, a liberal group critical of the federal plan.
The idea for an industry safety net was sailing through Congress last fall. It passed the House, but stalled over a tort-reform debate in the Senate. (Tort-reform backers wanted to limit terror victims' rights to sue for negligence after an attack - for instance if a poor-performing guard was allowed to stay on the job). The House-passed plan would have insurance firms pay the first $1 billion in terrorism losses. The government would pay 90 percent of further claims. Momentum appears to be building again.
Backers say places like the Golden Gate Bridge are emblematic of broader industry troubles. The bridge's new insurance policy costs $1.1 million per year for $50 million in coverage - and doesn't include protection for terrorism. …