National Consumer Groups Applaud Congress' Call for Major Investigation of Insurance Industry

7/3/2002

From: Joanne Doroshow of the Center for Justice & Democracy, 212-267-2801

WASHINGTON, July 3 -- Consumers Union, the Consumer Federation of America, U.S. Public Interest Research Group and the Center for Justice & Democracy today praised members of the U.S. House of Representatives in calling for a General Accounting Office (GAO) investigation of the insurance industry's responsibility for creating nationwide medical malpractice insurance problems for doctors. Ten Democrats, led by Reps. John Conyers (Mich.), John Dingell (Mich.) and John LaFalce (N.Y.), the ranking members of three House Committees, have sent a letter to the GAO requesting that it investigate how the insurers' declining investment income and "insurance industry practices" have contributed to skyrocketing insurance rates for doctors over the last few months.

The GAO request comes less than two weeks after the Wall Street Journal ran a front-page investigative story reporting that medical-malpractice insurers' mismanaged pricing and accounting practices are responsible for huge premium increases for doctors and the withdrawal from the market of certain insurance carriers. The story also challenged the credibility of jury verdict statistics that insurers cite, published by Jury Verdict Research, as a reason for needing rate increases.

Travis Plunkett of the Washington, D.C.-based Consumer Federation of America said, "The Consumer Federation applauds Representatives Conyers, Dingell and LaFalce for insisting that Congress get the facts about medical malpractice insurance rates instead of rushing through harmful and half-baked legislation. The insurance industry's position on this issue reminds me of the kid who shot his parents and then demanded mercy from the court because he was an orphan. The evidence shows that insurers have only themselves to blame for rising malpractice insurance rates."

"Enron, WorldCom, now add insurance companies to the list of corporations whose shady accounting practices have wreaked havoc on the American public," said Joanne Doroshow, executive director of the New York-based Center for Justice & Democracy. "We applaud House Democrats for asking the GAO to take a hard look at how the insurance industry's mismanagement and greed lead to price-gouging of policyholders."

Susanna Montezemolo of Consumers Union said, "For several decades, we have seen these insurance crises followed by state tort 'reform' efforts. Yet the insurance crises continue to occur, even in states that have enacted tort restrictions. A federal tort 'reform' law would likewise do little to change the reality of the medical malpractice insurance marketplace. The primary causes of these crises are severe underwriting problems and the cyclical nature of the medical malpractice insurance industry. Congress should focus on these issues, rather than ineffective tort 'reform efforts."

"We always knew that jury verdicts were not the cause of rising insurance premiums. It's not the juries that are that are out of control, but rather the powerful insurance companies that are trying to manipulate the system," said Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, based in Washington, D.C.