TIRED OF INSURANCE COMPANIES GOUGING - IT'S TIME FOR INSURANCE REFORM

OPEN LETTER TO PRESIDENT GEORGE W. BUSH:
MR. PRESIDENT, WE NEED TO START TALKING ABOUT INSURANCE REFORM
(as published in October 9, 2006, Michigan Lawyers Weekly)

Dear President Bush:

For years you have attacked lawyers and our civil justice system for a so called “lawsuit crisis” which you claim is causing insurance premiums to skyrocket and hurting the economy. Meanwhile, you have failed to hold the insurance industry responsible for fraudulently raising premiums and denying coverage while making windfall profits on the backs of Americans.

Your stalwart support of the insurance industry over Americans is unsupported even by facts and studies from your own administration. For instance, Justice Department statistics show that injury cases filed in U.S. District Courts fell 80% between 1985 and 2003 and Bureau of Justice Statistics show that the number of state personal injury trials has decreased 32% between 1992 and 2001. In Michigan the insurance industry itself reports a 75% decline in payouts to medical malpractice victims, and the numbers of civil lawsuits regarding wrongdoing and injury have been declining drastically for years.

So what is the real problem if not lawsuits and our civil justice system? The real problem is a runaway, unregulated insurance industry. There’s only one solution to that, Mr. President: insurance reform.

The insurance industry is the only industry (outside of major league baseball) that is unregulated. The trillion-dollar insurance industry, which has been making huge profits for years, must be held to the same standards as other businesses; namely fiscal accountability, transparency, and honesty.

Insurance reform would help working families, doctors, small business owners and our economy by lowering insurance premiums, ending insurance company fraud, and curtailing price gouging by the insurance industry.

There are numerous examples of insurance industry gouging, Mr. President. Despite Hurricane Katrina --and in the face of huge and rising premiums for all of us-- the insurance industry racked up $44.8 billion in profits last year for homeowners and auto insurance alone while raising its surplus by more than 7% to nearly $427 billion.

Even your wealthy friend Senator Trent Lott was cheated by the insurance industry after his Mississippi home was destroyed by Hurricane Katrina. Insurance reform could prevent such huge, economically devastating, and widespread fraud, Mr. President.

Mississippi Attorney General James Hood described insurers who defrauded homeowners after Katrina as “the robber barons of our time.” Mississippi was forced to sue the insurance industry because adjusters tried to cheat homeowners out of millions of dollars in claims. But one state, standing alone, is no match for an industry with hundreds of billions of dollars to protect it.

Here in Michigan, the insurance industry used its muscle to evade and finally destroy a law that merely required the number of medical malpractice insurance cases be reported so that lawmakers might have some idea if these lawsuits were really increasing as the insurance industry claimed (suits were rapidly declining instead).


In Oklahoma, tornado victims were cheated when State Farm acted “recklessly” and with “malice” in denying insurance claims on their family homes. The FBI raided Hospital Corporation of America offices after massive systematic Medicare insurance fraud and HCA pled guilty to 14 criminal counts and agreed to pay $1.7 million to settle the case. California earthquake victims were routinely defrauded by State Farm, and State Farm officials lied in court about it. Prudential agreed to pay a $35 million fine and set aside money to settle policyholder suits after an investigation found the company had defrauded more than 10 million life insurance customers.

In New York, Attorney General Eliot Spitzer uncovered ubiquitous wrongdoing in the insurance industry, testifying that “a small group of brokers and insurance companies essentially control the market, having created a network of interlocking connections and secret payments which ensure that the bulk of business goes to certain insurers and that profits remain high. The bottom line is the consumer pays more for coverage.”

Mr. President, we can all work together to stop this. Insurance reform worked in California. After pro-insurance “caps” on the rights of victims hobbled the legal system, insurance premiums for doctors still increased by an astounding 190%. When insurance reform was enacted, removing the insurance companies’ anti-trust exemptions, doctor’s insurance premiums finally leveled off.

In Missouri lawmakers voted overwhelmingly to give the state insurance director more authority to veto doctor’s insurance premiums that are “excessive” or otherwise inappropriate.

Insurance reform –such as legislation to remove the antitrust exemption for the insurance industry and to create accountability over hundreds of billions of dollars of our premiums dollars-- would go a long way toward helping to lower rates for everyone, and reign in insurance company fraud and price gouging.

Instead of bashing our civil court system and undermining our Constitution Mr. President, you need to stand up to the insurance industry and enact insurance reform.



Yours truly,
Jesse M. Reiter
President, Michigan Trial Lawyers Association