Mass. Economic Warning: Insurance Market Short on Capital
East News • January 27, 2006
Massachusetts is facing a shortage of insurance capital that could jeopardize the state's entire economy, especially if a major storm hits the metropolitan Boston area, the Commonwealth's ...
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Subject: Is anyone surprised???
Posted On: January 27, 2006, 2:38 pm CST
Posted By: Mike
Comment:
This article is pretty interesting - it looks like graft, corruption and Machiavellian legislative moves can't actually defeat the laws of economics! Past Massachussets legislators have sowed the bitter harvest that today's policyholders must reap.
Not surprisingly, if you create a system where home domiciled insurers are able to consistently shift bad risks onto out-of-state insurers (i.e., suckers), as many of those companies are going to stop writing business in your state.
Also, I thought part of the insurance department's job in setting rates was to ensure that rates are adequate to provide for coverage of loss as well as neeeded surplus. Why hasn't the Dept. of Insurance mandated that rates be high enough to both pay claims and ensure surplus adequacy? Sounds like the other states have done that. Could it be that years of inadequate rates, kept low by the administration to win votes, has finally depleted the state's surplus? My parents always told me there's no such thing as a free lunch; eventually someone has to pay the bill. Maybe it's time the Mass. legislature started realizing that.
Mitt Romney seems to get it.
Subject: Is anyone surprised???
Not surprisingly, if you create a system where home domiciled insurers are able to consistently shift bad risks onto out-of-state insurers (i.e., suckers), as many of those companies are going to stop writing business in your state.
Also, I thought part of the insurance department's job in setting rates was to ensure that rates are adequate to provide for coverage of loss as well as neeeded surplus. Why hasn't the Dept. of Insurance mandated that rates be high enough to both pay claims and ensure surplus adequacy? Sounds like the other states have done that. Could it be that years of inadequate rates, kept low by the administration to win votes, has finally depleted the state's surplus? My parents always told me there's no such thing as a free lunch; eventually someone has to pay the bill. Maybe it's time the Mass. legislature started realizing that.
Mitt Romney seems to get it.