Ag Report Claims Insurance Industry Caused Rate Hikes

By Christopher B. Daly, Ap | THE JOURNAL RECORD, September 18, 1986 | Go to article overview

Ag Report Claims Insurance Industry Caused Rate Hikes


Christopher B. Daly, Ap, THE JOURNAL RECORD


BOSTON - Dramatic increases in liability insurance premiums for doctors, governments, businesses and other groups are caused by the insurance industry's own decisions and not excessive lawsuits, according to a study prepared for the nation's attorneys general.

Despite alarming reports of a liability ""crisis,'' the industry is profitable and is not suffering from an ""explosion'' of litigation in state courts, the authors said.

The study, which blames the industry for underpricing insurance in the 1970s to attract revenues for investment, says, ""The emphasis on a need for change in the civil justice system to rescue the insurance industry from financial problems is therefore entirely misplaced.''

Similar conclusions were drawn in a study released by the Consumer Federation of America. In the past decade, jury awards in damage cases have increased at the same pace as inflation, and economic conditions have raised costs, the national consumer group found.

The 45-page report to the nation's top legal officers, obtained by the , was prepared for discussion at the National Association of Attorneys General convention in Seattle.

It was written by two aides to Massachusetts Attorney General Francis X. Bellotti, who sits on an association's insurance panel with his colleagues John Van de Camp of California, Lacy H. Thornburgof North Carolina, Jim Mattox of Texas, Charlie Brown of West Virginia and Bronson LaFollette of Wisconsin.

The report notes the recent skyrocketing cost and restricted coverage of liability insurance for organizations, municipalities and professionals, but it rejects the industry claim that premiums arerising in response to growing jury awards, and criticizes a February federal report that agreed with the industry.

The federal report, which was sent to each attorney general, was prepared by an inter-agency working group and prompted President Reagan to call for an examination of the nation's tort system, the legal mechanisms for resolving injury claims.

""The facts do not bear out the allegations of an "explosion' in litigation or in claim size, nor do they bear out the allegations of a financial disaster suffered by property/casualty insurers today,'' the report said.

The authors warned the attorneys general to study conditions in their states carefully before advocating changes at the state level, where 98 percent of liability cases are tried and where most insurance regulation takes place. …

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