New Dem of the Week: Allyson Schwartz
State Senator, Pennsylvania
The insurance industry in Pennsylvania is in dire straits. Rates have been soaring for all types of insurance, from health to home and auto policies. Consumers, meanwhile, have become increasingly unhappy. According to the Pennsylvania Insurance Department, between 2001 to 2002 there was a 48 percent increase in homeowners insurance complaints, a 23 percent rise in auto insurance complaints, and a 26 percent surge in health insurance complaints.
To address consumers' concerns, State Senator Allyson Schwartz, a member of the DLC's State Legislative Advisory Board (SLAB) and the State Senate's Banking and Insurance Committee, recently introduced legislation (SB63) that would create a consumer advocate's office similar to those in Georgia, Virginia, West Virginia, Oregon, and Florida. The sole purpose of the office would be to "advocate for the consumer and classes of consumers in insurance matters," she explained. Annual fees paid by insurance companies that do business in the state would fund the office.
There are myriad factors driving up insurance rates, ranging from large payouts that companies have had to make, to revenue shortfalls stemming from under-performing investments. Schwartzs move would ensure that Pennsylvania consumers have someone keeping an eye out for their interests each time insurance rates go up, checking to see that price hikes are in fact justified.
Pennsylvania has been in the national spotlight recently because of its high medical malpractice insurance rates, which are well above the national average, and which nearly caused a doctors' strike that was averted by Governor Ed Rendell.
But that was only the latest in a string of troubles. "We've been through an auto insurance crisis, a homeowners' insurance crisis and now a medical malpractice insurance crisis," Schwartz told the Pittsburgh Post-Gazette. "We need someone who will not only represent consumers during these crises, but also try to prevent the next one by uncovering problems before anyone loses coverage."
Pennsylvanians pay insurance companies $24.6 billion annually in premiums, and yet 17 Pennsylvanian insurance companies went into liquidation in 2001 and 2002. Four more were being "rehabbed" by the Insurance Department to stem the tide of liquidations.
The state's consumers, meanwhile, spent 77 percent more for all types of insurance between 1997 and 2000. Schwartz argues that, particularly in a time of rising costs and uncertain availability of insurance, her bill would better protect consumers and hold the insurance industry accountable.
The advocate's duties would include resolving individual problems, identifying needed consumer protections, examining consequences of insurance filings to consumers, and recommending actions to be taken by the insurance department to benefit consumer interests.
Additionally, the consumer advocate will provide technical assistance with complex insurance laws and regulations to help average Pennsylvanians cut through the red tape. Individual and group complaints would be reviewed for patterns of unfair practices and the advocate would then recommend appropriate action. The office would also educate consumers about risks and other issues, providing consumers with unbiased information on coverage amounts, discounts, non-renewals, cancellations, rate changes, minimum requirements, liability coverage, policy disclaimers and waivers, policy coverage and exclusions.
"It would be involved in a way consumers are not," Schwartz said. "It would be much more proactive, assuring consumers have access to insurance coverage. Like the PUC [public utility commission] consumer advocate, it would make recommendations to the insurance commissioner and speak out publicly." The PUC advocate has saved Pennsylvanians tens of millions in utilities charges, according to the Philadelphia Daily News.
While adding another state office in tight budget times might appear counterintuitive, studies show it would be a worthwhile investment. The consumer group Public Citizen found that states with such advocates enjoyed significantly lower premiums than those that didn't.
"Creating an office of consumer advocate for Insurance will help boost consumer confidence in the industry and in government by ensuring accountability of the industry to consumers and to the public," Schwartz said.
Editorials in the Philadelphia Daily News, The Philadelphia Inquirer, and The Harrisburg Patriot-News agree that such an office is vital to guard policyholders' interests. The Inquirer notes, "The new official would be an independent voice in an area that sorely needs one."
Pennsylvanians, said Schwartz, "should have the confidence of knowing a consumer-oriented crosscheck is in place to review insurer filings, rate increases and other insurance company activity, and to protect you against unethical activity of insurance companies." If the General Assembly adopts SB63, they will.
