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Consumer Federation says insurance firms ‘gouging’ customers to bolster record profits

Consumer Federation says insurance firms ‘gouging’ customers to bolster record profits

By Dan Caterinicchia
ASSOCIATED PRESS

11:57 a.m. January 8, 2007

WASHINGTON – A consumer group blasted U.S. insurance companies on Monday for charging motorists and homeowners more for coverage, while paying out less, at a time of record-setting profits.

The Consumer Federation of America’s insurance director, J. Robert Hunter, accused the biggest players in the industry of “gouging” the public on their way to an estimated combined after-tax profit of nearly $60 billion in 2006.

Hunter’s comments followed the release of a study by the federation that showed automobile and home insurers’ profits have surged in recent years – despite billions of dollars in damage from Hurricane Katrina and other storms – in part because they have shifted more costs to consumers and taxpayers.

The portion of premiums paid in benefits by the largest insurers has dropped from 75 percent in the late 1980s to about 60 percent today, the study found.

“It’s a combination of gouging” and being too conservative, Hunter said.

But an insurance industry trade group countered that the companies’ profits and their high rates of return for investors is healthy for a risk-based industry that could lose investment capital without an occasional solid year.

The consumer group’s study estimates the insurance industry’s net income after taxes in 2006 will be $59.9 billion, shattering the 2005 record of $48.8 billion and 2004’s $40.5 billion.

Those profits have been achieved at the same time that consumers are receiving less money after filing claims. (keep reading)

Posted at 7:00 PM, Jan 08, 2007 in Permalink | Comments (0) | TrackBack (0)