Thursday, October 21, 2021

Insurance Commish Possible Insurance Rate Hikes

 Insurance Commish Miguel Chaney issued the following statement.  

As your Insurance Commissioner, protecting consumers in the State of Mississippi is my number one priority. So, when I see legislation before Congress that would needlessly raise the property insurance premiums of everyone in the state – and indeed everyone in the United States – I feel obliged to speak up because Mississippians could face over $100 million dollars in increased insurance cost.


My concerns center on the partisan “Build Back Better” Tax proposals.   On the face of it, the bill has nothing to do with insurance and the White House promises that the plan will affect only those who earn more than $400,000 a year. However, an unintended consequence is that, if passed as written, it would drive insurance prices higher, causing consumers at all income levels to suffer financially.


report by the non-partisan R Street Institute found that this “hurricane tax” could add as much as $240  annually to the average Mississippi family’s property insurance premiums. The reason is that the proposals would increase the price of international reinsurance, the financial backstop that allows the U.S. insurance market to function.


American insurers rely heavily on reinsurance, effectively insurance coverage for insurers, most of which is purchased from the international reinsurance market. Without access to overseas reinsurance, the coverage the insurers could underwrite would be limited by the amount of their own capital reserves – which would make insurance much less available.


For example, Bermuda re/insurers paid a total of $22 billion to rebuild the US Gulf and Florida Coasts from seven hurricanes of 2004-2005, including nearly 30% of insured losses from Hurricanes Katrina, Rita and Wilma.   The Bermuda market has paid more than $209 billion to US policyholders and insurance companies during the five-year period from 2016 to 2020. 


This kind of reliable protection is critical for states like Mississippi that face the potential for strong storms each year.


Many large reinsurers are based in Bermuda, where low taxes limit expenses, allowing reinsurers to be competitive in their pricing. Their cost-dampening influence reverberates through the international market to the benefit of U.S. insurance buyers.


However, provisions in the international tax proposals being discussed as part of the ‘reconciliation bill’ support implementation of a global minimum tax rate of between 15 and 28 percent, which would drive the price of overseas reinsurance higher. A reinsurer in Bermuda forced to pay more in taxes would respond by raising prices to target the same return they had before the new tax took effect.


Using this logic, the R Street Institute report calculated that the proposals would add between $10.8 billion and $20.3 billion to U.S. insurance premiums per year, depending on the tax rates chosen by policymakers.


As noted earlier, In Mississippi alone, property insurance costs would increase between $100 million and $160 million a year.  This is $130 to $230 of additional cost to every Mississippi family, regardless of their income level. 


Compounding the damaging effects, higher prices would likely result in fewer families buying property insurance, increasing the costs paid by taxpayers in disaster aid through the Federal Emergency Management Agency (FEMA).


The irony is that, despite the billions of dollars of added insurance premiums that Americans stand to pay, it will not raise a cent in extra taxes for the United States. In effect, Mississippi consumers will be paying more for hurricane coverage to fund the paving of the roads in Bermuda, or some other place in the world.


Please join me in urging Mississippi’s Congressional delegation and congressional leaders to keep the best interest of our citizens in mind and reject this bad tax plan.



Anonymous said...

Uh oh….Fondren business is getting better….lack of parking is an issue

Not good for your targeted audience … horrible

Anonymous said...

Democrats- the gift that keeps on giving.

Anonymous said...

@8:27pm - Republicans- the grift that keeps on grifting.

Anonymous said...

Patiently waiting for the poster to say "Insurance is a scam...", yet he cant self insure and has to have insurance because everything he owns is owned by the bank. This is a great article that dives into just one facet of the market of insurance. Many people think you just pay premiums, the agents and companies get fat, and life goes on. There is a whole world of re-insurance, investing, and portfolios of risk that many people have no cluse how much the insurance world affects other markets, or what affects it.

Side note, workers compensation rates are some of the lowest they have ever been, and steadily dropping.

Anonymous said...

I dont know why we are discussing Fondren here.

And I will also never understand why pointing out crime, or being angry that Jxn leaders dont demand improvements is considered bashing?

Do people really think that things will immediately turn around if we sing the (empty) praises of Jxn?

Maybe if more Jxn residents got mad at the horrendous conditions, the way they do at the people who point them out...I mean, it wont fix it all but it cant hurt?

Anonymous said...

I enjoy watching the same acquaintances who blamed every minor woe on Trump, now staunchly protest that absolutely none of these things are, in any way Biden's fault.

Anonymous said...

Just raise the prices and bankrupt everyone and leave anyone that pays anything living in a tent.

Anonymous said...

I appreciate that he's told us something we already knew was coming. They are restarting the Obama era stuff times 10. Stock up...lock and load and pray.

Anonymous said...

They all want to get in on the act, who can out the other, they all must be running to keep their jobs. The rise in insurance is more a product of increased natural disasters due to climate change whether cyclical or man made. Universal minimum tax benefits the US in more cases than not. A lot of jobs will come back and even more won’t have reason to leave.

Anonymous said...

gotta keep the unlimited potential of executive pay, bonuses, stock options growing. who really gives a crap about the hourly wage earners anyway..

Anonymous said...

What about CMU? All free as a bird.

No parking in Fondren?

No charges in Canton?

What is going on Lynn????

Oh….you are suing your boy toy Nick Coughlin….does he get to work his fines off under the cover of night?

EFGAlterEgo said...

8:27 AM
You can say that when Jackson has a Republican mayor and multiple year high murder rate.

Anonymous said...

Nothing says murrican freedum better than below cost insurance for fat cat beachfront second and third homes!

Anonymous said...

Lets be a little bit more genuine here Miguel....The R Street Institute is absolutely not non-partisan.

and lets say all of this is true...I should be concerned about $10/month so we can eliminate offshore tax havens and these companies can actually pay taxes? Well worth that cost.

furthermore, you don't mention any of the benefits of the reconciliation bill...far outweighs $100-$230/year.

Anonymous said...

The Mississippi legislature passed the Mississippi Landlord tenanct Act which was supposed to lower insurance rates. How many have seen a decrease or refund in their insurance rates?

Anonymous said...

Insurance is socialism. Republicans love insurance companies. COINCIDENCE?!

Grifters gonna grift.

Anonymous said...

@10:37am - Exactly. It’s just more grift for the grifters.

Anonymous said...

Things will and must cost how much they will and must cost. Even if - using this example - the reinsurance companies made no profit at all and simply charged the pure actuarial cost of the insurance, that would still be some number. Of course, those that work for those companies and their shareholders/owners would have no interest in the, ahem, business if there were no return on their labor or risk of capital, which is true of any worker or investor in any business. So there must be some profit to allow for labor costs, ROI, etc. None of that changes regardless of who pays the premium. The only real choices are those who consume the product pay for what they consume - in this case, those who have insurance pay exactly the "pure cost" of the insurance plus a profit for the company, or, someone else does. Same is true of everything else. It is a debatable point as to how much profit is reasonable (and the market will exert some control if there is real competition) or how much to tax that profit is reasonable, but there can be no debate that someone must endure the cost of insurance. And every other good or service.

As to Trump or Biden, Republican or Democrat, "conservative" or "liberal," that has nothing to do with the simple financial facts. That politicians pander shouldn't surprise anyone - "capital" in whatever form will always seek the highest return from its deployment. Ever hear anyone say, "Yeah, I was offered a better/more satisfying job with better pay/benefits but I'll just keep the one I already have..."?

Anonymous said...

@10:50a- Insurance is NOT socialism. If socialism were a factor, you wouldn't need insurance because you wouldn't OWN anything of any decent value and you'd have no risk of expensive medical care because all that would be available is what the government offered for free.

I usually find that the people who diss on insurance companies either a. don't understand their policy and think insurance should pay for anything and everything, b. don't actually own anything, or c. are just ignorant.

To act like Republicans "loving" insurance companies affects rates further proves your incompetence on the subject. Insurance companies are a business. Like any responsible business, they will work to keep their company profitable. When expenses increase, no viable company just "eats it," they pass the increase on to consumers at the point of purchase. This will be the most damaging "cost" of Biden's "zero cost" legislation to us regular folks of ALL races, economic classes, and political affiliations.

The commissioner was simply trying to educate you with the truth. Your response sounds like robotic sound bites from a brainwashed puppet.

Anonymous said...

@12:58pm - It’s clear you don’t understand what socialism is. Or anything really, based on your comment.

Anonymous said...

"Insurance is socialism" and "Insurance is NOT socialism"

I do not know what the original commenter meant and it could easily be a troll, but insurance as it operates in this context does have socialistic characteristics. Its primary purpose from the consumer perspective is to share - not eliminate because it cannot do that - risk by pooling capital (premiums) and redistributing it according to need (losses). Whatever socialist characteristics may exist from the provider perspective vary when a particular company is a stock, mutual, fraternal, etc. company. And there isn't anything at all wrong with any of that, as far it goes.

For whatever reason, this reminds me of the old joke about socialism being the perfect long as no one tries to implement it. The problem is that no one really wants _socialism_, what they actually want is their own way on any- and everything that might pop into their head. Which reminds me of another old joke - it's really easy to be a socialist: get your parents to pay whatever bills you run up and TA-DA!, you're a socialist! Like so many other things, actual socialism isn't nearly as much fun when it requires hard work and personal sacrifice.

Anonymous said...

I think 10:50 was talking about Social Security and unemployment, its the samee thing right.

Anonymous said...

More parking has been needed around that area for over 20 years. Hope those special needs hipsters aren’t getting too excited.

Anonymous said...

@2:14p- Please point out what I don’t understand.

If you think labeling the insurance model as socialism is accurate, then I’m sorry, you’re the one who doesn’t understand.

Pooling premiums doesn’t pool ownership. Pooling risk has zero to do with socialism.

I Ain't No Insurance Expert, But, I Do Know This... said...

Don't forget that 60% of democrats don't own property and pay no homeowner's insurance. And, for that matter pay NO renter's insurance. The point of my post is to remind you that these people (voters) don't give a shit.

Anonymous said...

Chaney would better serve his constituents by getting Congress to remove insurance companies' exemption from antitrust laws. Although that would likely impair his getting a cushy consulting job with them when he calls it quits after this term.

Chaney's off saved me $Thousands$ said...

Best State Agency in the business. If you don't know about the "Balance Billing" law in Mississippi when it comes to medical bills, you better do your research and put Chaney's office in motion for you as a Mississippi resident. Kingfish oughta do a story on this topic.

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