["The insurance industry has tremendous financial and political…]

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"The insurance industry has tremendous financial and political power. But their arrogance will backfire on them."

While Reagan points to the menace of terrorists overseas, citizens at home are facing fear and extortion from one of the most rapacious bands of conspirators to plot against the American people. This is the insurance industry, which is holding consumers for ransom by raising insurance costs to exorbitant levels or refusing to insure at any price.

Insurers in 1985, for example, raised a Florida plumber's premium from $12,794 a year to over $27,000, although he has never filed a claim. They have raised liability insurance costs for the city of Miami Beach from $750,000 to almost $2 million. They have refused insurance to 100 ambulance service operators in California.

Thousands of professionals and small businessmen have been put in an impossible dilemma. The law says certain enterprises must carry liability insurance. But the providers of insurance have gone on strike. An ambulance operator who was refused insurance wailed that "it does not jibe with normal business practice."

Normal business practice is to maximize profits at all costs. The insurance business is no exception. However, only part of the insurance companies' profits come from collecting premiums. Their major profits come from investing the premiums wherever the returns are highest.

The insurance industry has plenty to invest. In 1981 more than 4800 companies took in a combined $200 billion. This gave them a total capital of $700 billion, more than the combined assets of the 50 largest American industrial corporations. Only the banks handle more money than the insurance companies.

Invisible bankers

Andrew Tobias, in a critique of the insurance industry, calls the insurance companies "invisible bankers." Unlike depositors in a bank, who expect to get their money back with interest, buyers of property/casualty insurance cannot get any of their money back unless they meet with misfortune. Their money becomes the property of the insurance companies to use as they see fit.

The insurance companies have staggering sums of money at their disposal. It is estimated that the Prudential Insurance Co. alone invests $38 million a day. They dominate trading in the stock market, causing wild gyrations as they move vast sums in and out of stocks and bonds. They decide the shape of our cities as they finance construction of major office buildings. Many buildings are owned outright by the insurance behemoths.

Insurance capital has merged with industrial capital as most of the major corporations have bought into the industry. International Telephone and Telegraph Corp. alone owns 22 insurance companies.

The insurance executives operate behind such a curtain of secrecy that no one has been able to establish the true costs or profits of these corporations. Officers of mutual-fund companies, where the policy holders are the legal owners, elect themselves to office, determine their successors, and are accountable to absolutely no one for their actions.

Political clout

For over a hundred years the federal government has been unable or unwilling to regulate the insurance industry. In 1979 the Federal Trade Commission (FTC) began to publish statistics on insurance costs. The insurance moguls did not like this and exerted a little of their political 16 SOCIALIST ACTION clout. They got the Senate Commerce Committee to ban the FTC from further work in this area.

Later, the Senate passed legislation to further protect the insurance industry's privacy. Under the McCarran-Ferguson Act the insurance industry is exempted from provisions of the antitrust laws.

Only 50 state commissions, usually dominated by the industry, "regulate" this multibillion dollar industry—with all its national and international ramifications. In California it takes over four months for the insurance commission to even respond to consumer complaints.

The insurance crisis and public pressure forced the insurance commissioner to quit last June. His deputy took over. She is a former vice president of an insurance company. The fox still guards the chicken coop.

Trivial claims?

With so much money in their coffers and such a cozy relation with the regulators, why are the insurance companies raising rates and refusing to write policies? Insurance companies say they are losing money because greedy citizens sue for the most trivial injuries and soft-hearted juries award them million-dollar settlements.

The real reason is that the insurance companies are no longer reaping the super profits from investments that they did in the early 1980s. At that time they lowered premiums to compete for insurance dollars. Now they want to soak their customers to bring up the overall return on their capital.

While a few multimillion dollar judgments have made headlines, most large awards have been reduced by judges or GREED INSURANCE INC. overturned on appeal. The Consumer Federation of America has concluded that there has only been a modest 15 percent to 20 percent increase in malpractice settlements-in line with the inflated costs of medical care.

Despite this, the insurance industry complains it has been paying more in claims than it has taken in from premiums. It says it lost $5.5 billion in 1985.

Actually, the companies have never paid out more than they took in. They have to add office costs, salesperson's commis -sions, and reserves for possible future claims to arrive at a loss. But they don't include their income from investments. When this is factored in, the $5.5 billion loss becomes a $1.7 billion profit.

Greed without limits

But corporate greed has no limits. Insurance companies dislike paying on claims. Their model customer is the safe driver who pays them $300 a year and never has an accident. In the course of 20 years the customer has given the company a gift of $6000 with nothing to show for it except "peace of mind."

The insurance companies cannot eliminate all claims by all policy holders, but they are determined to make those claims as small as possible. They would like to eliminate all compensation for pain and suffering. Put a cap on awards in malpractice suits. Fine people who file "frivolous" suits. Make any large award by a jury look like a criminal ripoff of the insurance company.

The industry has launched a powerful offensive to convince the public that greedy claimants must be curbed before reasonably section of the establishment has been enlisted in the campaign against victims of misfortune. As expected, President Reagan calls for federal restrictions on claimants benefits, but opposes federal regulation of the insurance industry.

AFL-CIO defaults on leadership More disappointing is the stand of the AFL-CIO. The trade-union leadership has lined up with the bosses on this issue, and urges that caps and limits be put on workers who seek compensation for losses and injuries.

California citizens last month were stampeded into voting for Proposition 51, which restricts the ability of accident victims to collect judgments already won when more than one party is at fault. Californians voted this concession to the insurance industry because they believe they will get lower rates.

They will be disappointed. Nebraska and Iowa passed similar laws, but insurance rates in those states continue to climb. The insurance companies have said this one concession is only the beginning. They will keep up the pressure-raising rates and refusing insurance-and increasing the volume of their propaganda barrage until the costs of accidents are borne mainly by the victims.

The insurance industry has tremendous financial and political power. But their arrogance will backfire on them. Enraged customers are turning a spotlight on the practices of this industry that dictate whether an enterprise survives or not. The industry is being challenged and there is talk of more effective regulation.

In June, the state of Florida told insurance companies to cut their rates 40 percent on some coverage. The insurance companies' response was swift and arrogant. Eight companies declared they would no longer write policies for Florida citizens.

Obviously, it takes more than action by individual states to bring the insurance companies under control. Federal legis -lation is demanded.

But an industry that wields the economic and political power of the insurance conglomerates will not easily submit to regulation by anyone. The ultimate solution to the insurance crisis must be the nationalization under workers' control of the insurance industry and the industrial/fi -nancial complex that controls it.

This pamphlet by Carl Finamore discusses the road to building a mass movement to stop the warmakers.

(24 pp., 75 cents; $1.10 + postage)

Order from: Socialist Action, 3435 Army St., Rm. 308, San Francisco, CA 94110

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INJURED (PARTY RIGHTS # ROLACK VA DA IVF HOX XXI IX 86 JUN THE INSURANCE CRISIS

Mass Action Strategy for Peace, Jobs and Justice