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

For Release:
July 3, 2002

Contact: Joanne Doroshow
212/267-2801

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

New York, NY - 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 industrys' responsibility for creating nationwide medical malpractice insurance problems for doctors. Ten Democrats, led by Reps. John Conyers (MI), John Dingell (MI) and John LaFalce (NY), 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 DC-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." J. Robert Hunter, Director of Insurance for the Consumer Federation of America, said, "After personally witnessing three med mal 'crises' in the mid-1970s , the mid 1980s and today, all directly caused by the insurance company economic cycle, at last a federal study of the real cause of these periodic upheavals (rather than the bogus insurer-sponsored excuse of lawsuit explosions precisely at each cycle turn) has been undertaken."

"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 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, DC.