Why The Insurance Industry Wants To Defeat Referendum
Karen Koehler, President of the Washington State Trial Lawyers Association, recently wrote a letter to the state bar accusing the insurance industry of using slanderous and reckless television ads against trial lawyers. The insurance industry has already spent $7.7 Million to defeat Referendum 67, the law up for vote this November. Referendum 67 is designed to force insurance companies to treat their policy holders fairly during the claims process. Proponents of Referendum 67 have raised over $750,000 mostly from trial lawyers.
With support from Democrats and Republicans alike, the Washington state legislature enacted Referendum 67 into law earlier this year. The insurance industry was unhappy. So a handful of out-of-state insurance companies spent millions to obtain more than 150,000 signatures to put the law up for a vote this November. The insurance industry has cleverly called itself "Consumers Against Higher Insurance Rates." The major argument against Referendun 67 is that the new law will increase insurance premiums for everyone. But this makes me wonder.
Why would the insurance industry spend $7.7 Million to defeat a measure that could conceivably give them an excuse to raise premiums and make even more money off of Washington State citizens? Do you smell a rat with this line of reasoning? I mean, are you telling me that the insurance company really cares about saving us consumers as much money as possible by paying lower premiums? And what about good ol' market forces at work? If insurance companies choose to violate Referendum 67 and as a result then must increase their rates, won't this provide an incentive to other insurance companies to comply with the law so they can keep their rates low, and hence gain more market share and increase profits as a result? Follow the money. There is something remarkably suspect about an entire industry spending millions and millions to defeat a measure that is designed to protect consumers (that's you and me) from being screwed by that industry. Are the citizens of this great state really to believe that the insurance industry is really concerned about our pocket books? And saving us as much money as possible? (yes, I'm smirking.) What about triple damages? Some people have problems with this part of the law.
But you really have to understand the business of insurance and why this provision is absolutely necessary. First, the only incentive for insurance companies to obey the law is the prospect of losing money or paying out more money if they are caught cheating or acting unfairly. Second, more and more carriers employ the tactic of spending much more money to fight a case that could be settled by a much lesser amount. Many people are surprised to learn that many insurance companies will spend $50,000 to fight a $25,000 claim.
Why? Because of the policy of discouraging people from hiring attorneys and asserting claims. Probably 80-90% of claimants will usually fold and accept the company's last low ball offer rather than hire counsel and litigate. The carriers know this, and they make sure the other 10-20% who choose to fight will know how difficult it will be to recover on a legitimate claim. In the end, the carrier still makes alot of money off of those claims that are settled for a fraction of what the claimant is legally entitled to receive.
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