Nader Charges Insurers With Faking a Crisis

Midwives, day-care centers, engineers and entire cities are losing their insurance policies or suffering huge premium hikes because insurers are fabricating an industrywide economic crisis, consumer advocates charged Thursday.

Consumer activist Ralph Nader said the dramatic step taken by insurers “in order to get high premiums from millions of Americans . . . reflects a major economic crisis, but one that is manufactured by a very wealthy insurance industry.”

Insurance companies nationwide are looking to increase profits and reduce malpractice payments in light of the industry’s smallest profit margin in years. And, activists charged at a news conference, they are accomplishing this by canceling policies, failing to renew them or increasing premiums as much as 1,000%.

Dennis Connolly, vice president for liability at the American Insurance Assn., disputed Nader’s charges, saying insurers are being forced to drop riskier clients because they simply cannot afford the huge malpractice and negligence liabilities being assessed by courts. Jim Dinegar, a Washington representative for the Independent Insurance Agents of America, agreed that the industry cannot survive the huge lawsuits such as those brought against companies that allegedly cause environmental hazards. If legislators fail to offer more protection for insurers, Dinegar said, companies that rely on insurance protection might fold.

But Bob Hunter, president of the National Insurance Consumer Organization, said insurers are overreacting. The insurance industry could easily reverse its fortunes with small premium increases and without imperiling businesses that rely on their insurance, Hunter said.

Nader said he is asking Congress and the Justice Department to investigate the crisis, including the question of whether insurers are illegally boycotting certain businesses. He said the government should set up its own system of “reinsurance” to back companies that lose their coverage to show insurers “that they can’t play Russian roulette with all these industries.”