APCIA: WSJ Article Fails to Explain Causing of Rising Insurance Rates

David A. Sampson, President & CEO of the American Property Casualty Insurance Association (APCIA), sent the following letter to the editor at the Wall Street Journal this week, responding to the article, "Runaway Insurance Costs Bring Back Talk of Price Caps ":

This article from the Wall Street Journal fails to explain the cause of rising insurance rates. It leaves the reader wondering what justifies the increase in prices, when in fact there are clear answers to this question.

The price of insurance is a reflection of cost pressures across the economy. When 40-year high inflation drives up the price of everything, insurance rates must follow suit to protect the policyholder against the higher cost of potential loss. When the average cost of a new car rises above $50,000, old auto insurance rates will not cover the cost of repair or replacement. When more than half of new homes are built in areas at high risk for wildfire, risk skyrockets and property owners will be left defenseless if insurers do not charge sufficient rates.

Insurers, along with many other industries that produce products of real value to everyday Americans, are under increasing assault from trial lawyers seeking to enrich themselves by turning our legal system into a betting market. These billboard attorneys take billions from undisclosed investors who pump the already overheated tort "markets" with even more profit chasing. The average family pays a "tort tax" of more than $5,000 a year as a result. Victims deserve justice and compensation, not exploitation. We need transparency into who is funding these lawsuits, reasonable limits on awards, and caps on attorney contingency fees, not artificial price controls. Florida took these special interests on a few years ago and insurance rates are stabilizing and coming down in many cases even decreasing.

Government price controls distort markets and create perverse incentives. Imagine the government telling automakers or builders how much to charge for the cars and homes they make. It's not a serious solution.

David A. Sampson

President & CEO

American Property Casualty Insurance Association