Herb Denenberg Column for week of February 25, 2003.


We've all heard about the medical malpractice crisis. Doctors and hospitals face escalating and sometimes unaffordable premiums and other insurance problems.


There's another insurance crisis we don't hear much about. That other crisis involves auto insurance, homeowners insurance, health insurance, disability insurance, life insurance and other lines of coverage as well. It involves both the insured and uninsured.


It involves skyrocketing premiums that are often unaffordable. It involves meritorious claims that are not paid promptly, that are not paid in full, and that sometimes aren't paid at all. It involves policies that are misrepresented. It involves giant insurance companies - such as Reliance - going belly-up and leaving policyholders holding the bag.


This consumer insurance crisis is not new. It's one that has been festering for decades but getting little attention. I have seen it over the years in complaints I receive from consumers and in my conversations with them.


We should be looking to the insurance commissioner of Pennsylvania and her Department of Insurance for solutions. An insurance commissioner has immense statutory power to make sure insurance prices and policies are fair, to make sure claims are paid in accordance with policy terms, and to make sure companies are sound and solvent.


But where have all those commissioners been hiding? Where have all the commissioners gone? Long time passing. We don't hear much about them except when they're named by the Governor (who usually pulls them forth from the insurance industry), and again when they resign - usually to go back to work for the insurance industry. For decades, we've had what is called revolving-door regulation - with commissioners coming out of the insurance industry, serving its interests during their tenure, and finally getting a plush job with the industry from whence they came.


Even in the midst of the great medical malpractice crisis we don't hear from the commissioner. I remember then Governor Schweiker announcing his commissioner would prepare a report on the malpractice problem. We're still waiting for that report. Perhaps it was completed but kept secret and simply never publicized. There was a hearing on the billion-dollar surplus accumulation of the Pennsylvania Blue Cross plans, which have important malpractice insurance implications. But nothing became of that.

Recent insurance commissioners have been part of the problem instead of the solution. One commissioner stood by while the legislature passed a demutualization bill that opened up perhaps the greatest rip-off of policyholders in insurance history.


Jonathan Stein of Community Legal Services called the Pennsylvania Insurance Department the "stealth agency." It should be in the forefront of insurance battles, but it seems to see nothing, hear nothing and say nothing. Maybe it should also be called the "steal" agency, taking from policyholders and giving to companies.


That doesn't mean it isn't functioning. It is. The Insurance Department and Commissioner always seem to be hard at work protecting the interests of the trillion dollar insurance industry and turning their back on the public and policyholders.


All too often the Insurance Commissioner is a lackey and lapdog of the insurance industry. So that is just one of many reasons whey we need an insurance consumer advocate along the lines of Senate Bill 63 proposed by Senator Allyson Y. Schwartz (D-Phila) and 16 other state senators. This would help solve the malpractice insurance crisis as well as the consumer insurance crisis.


The insurance consumer advocate would finally give the consumer a voice in Harrisburg. The consumer advocate would have the power and resources to properly represent the consumer interest before the Pennsylvania Insurance Department, before other agencies, and in the courts. The job of the insurance consumer advocate would be to make the case for the public and policyholders on all insurance matters. Even if the next insurance commissioner isn't a lapdog and lackey for the industry, the consumer advocate will still serve a valuable function by keeping the consumer's interest in the spotlight whenever insurance matters are to be heard or adjudicated by regulatory agencies.


This is an idea that has been kicking around a long time. On March 21, 1973, I testified before the Committee of Commerce of the U.S. Senate, advocating a federal consumer protection agency and a like agency at the state level. This idea of an all-agency advocate (such as Congress considered then) or a specialized advocate (such as an insurance consumer advocate) has been thoughtfully proposed and carefully considered for many decades. If there was ever a time for an insurance consumer advocate in Pennsylvania, the time is now. The legislature should take immediate favorable action on Senate Bill 63. It should be one important part of the reforms needed to straighten out the malpractice insurance mess and the rest of the insurance crises.


(Herb Denenberg is a former Pennsylvania Insurance Commissioner and consumer advocate.)

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