Insurance Transparency Project

I-Friends,

ITP is going to push its privileges today by pursuing briefly a business-story analogy that’s been on War Eagle’s mind.

First, ITP HQ’s switchboards lit up yesterday with the news that State Farm would pull out of Mississippi:

“We came to this decision reluctantly,” Robert L. Trippel, a senior claims officer with parent company State Farm Mutual Automobile Insurance, said in a statement Wednesday. “But it is no longer prudent for us to take on additional risk in a legal and business environment that is becoming more unpredictable. When there’s more certainty, we will reassess the situation.”
Senator Lott isn’t pleased:

“They continue to exhibit a degree of arrogance that causes me a great deal of concern. I had hoped they had come to terms with doing the right thing, based on the settlement they agreed to.”
And Attorney General Jim Hood is steaming:

“Hood likened the situation to “being in a death roll with an alligator” and said he hopes it leads to federal indictments and “true national insurance reform.”

Meanwhile, Commissioner Dale exhibits a passivity that will appear trance-like to those unfamiliar with insurance regulation.

“Dale, who recently announced he will run for reelection, said he is hopeful that State Farm will reverse its decision ’some time in the future.’ “
Now, another big insurer seeks to distance itself from State Farm

Allstate is now the second big insurer to break ranks with our fellow Illini from Bloomington.

Remember, State Farm, Allstate (and Nationwide) were the companies accused by Rep. Gene Taylor in his Jan. 6 letter to Barney Frank (read it on: Key Documents) as having met in the early days of Katrina and improperly agreed to deny claims:

“I have long suspected that State Farm, Allstate, Nationwide, and a few other insurers agreed to aggressively denied Katrina wind claims as they had never done before. One company would not have been able to get away with blanket denials if the others had been paying claims. The manipulated assessments by firms such as Haag Engineering and E.A. Renfro suggest a much broader conspiracy to default consumers and taxpayers.”
Meanwhile, back in Washington, Majority Leader Reid has signed onto the Lott/Taylor anti-antitrust exemption bill.

And just to make a point about the disconnect and inefficiency that I think will hurt the industry in the long run, Krugman today points that consulting giant McKinsey & Associates — not exactly United Policyholders in orientation — pegs at $98 billion the excess administrative costs in the health insurance system. That’s more than the property-casualty industry earned in its best-ever year — 2006 — and more than it would cost to health-insure the entire country, according to McKinsey: $77 billion.

Ok, now I point up a 1997 WSJ story by the great Alix Freedman summarizing how the tobacco industry was transformed. It’s up on
Key Documents.

Leaders of the Pact: How Seven Individuals With Diverse Motives Halted Tobacco’s Wars

Here’s the first sentence:

“Flash back to 1990 and try to imagine Big Tobacco, which was then flicking away opponents like so many ashes, ultimately agreeing to a settlement costing it more than $360 billion. What a difference seven years, and seven individuals, would make.”

As an intellectual exercise, substitute “Jim Hood” for then-Mississippi AG Michael Moore, “Richard Scruggs” of Oxford, Miss., for trial lawyer Michael Lewis of Clarksdale, Miss., (or for Scruggs himself), “Rigsby sisters” for Brown & Williamson whistleblower Jeffrey Wigan and — who? — for Bennett LeBow, the Liggett Group chief who undermined the industry’s solid front and moved to settle. Is it a stretch to compare State Farm to the ultra-tough R.J. Reynolds?

You could argue that insurance and tobacco are different, and they are.  But asserting in thousands of cases that Katrina did zero wind damage, that the current private-public wind/water patchwork is efficient, as the Property Casualty Insurance Association did, or that the industry “lost money on its core operations” in 2004 and 2005 and 25 of the past 27 years, as Marc Racicot did recently, or that state regulation and markets make sense in 2007 — all this loses fair-minded eagles, who only have enhanced industry efficiency in mind, and invites a potentially irreversible political response.

ITP has got to stop blogging so much and get that book proposal done.