The Sky Fell In Wisconsin

By Author: Marcus Stalder
Total Articles: 491
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Ever since the boy first reported the wolf, Chicken Littles have been playing variations on the theme of "the sky is falling". It's become one of these time-honored PR strategies. When threatened with a change in the regulations affecting your industry, you report the end of the world in sight. Take insurance as a classic example. For decades, insurers have managed to avoid antitrust and many of the laws that tie other industries. This has allowed insurers the chance to make a lot of money. Not surprisingly, anything that might threaten this arrangement has to be fought tooth-and-nail. The usual approach is to run a massive publicity campaign when the bill is first discussed. The ads warn the insurers will be unable to make a profit and all will go out of business. Without insurance companies, everyone will be on their own as homeowners, drivers and people unlucky enough to be injured or fall ill. The age of self-insurance will bankrupt us all.

Faced with these doomsday predictions, many lawmakers get cold feet. They are due up for election soon and may lose votes if too many in their wards are uninsured and get hit with ...
... claims. It takes a brave set of lawmakers to stand up against these scare stories. Well, let's have a big round of applause for Wisconsin. In 2009, the legislature decided to do something to protect you, the consumers. The insurers all predicted the end of the world. They would have to spend millions putting new systems in place. Staff would be laid off to save costs at a time when unemployment was already high and premiums? Well, premiums would go through the roof. The insurers did their sums. The rates would rise by at least one-third.

Well, the sky did fall in Wisconsin after the bill was signed into law. Except, this time, the sky fell on the insurers. Every state has a Department of Insurance and a Commissioner whose job it is to monitor the way the insurance industry plies its trade within state lines. Insurance companies have to file their accounts and something very interesting has happened. The rates did rise. But by less than 1%! In other words, the insurers have been making enough money without having to lay off staff and on effectively the same premium rates as before the bill became law.

This is not something the auto insurance industry can dispute. The evidence comes directly from the accounts they filed with the Department of Insurance. Looking around the US right now shows the average premium rates in Wisconsin are the fourth lowest among all states. So kudos to the lawmakers of Wisconsin who called the bluff of the local doomsayers. For once, the dishonesty of the insurers has been laid bare. Now all we need is a little more backbone across the nation. There are many bills proposed that would protect us consumers by limiting the right of auto insurance companies to increase rates without clear justifications, by insisting on the prompt settlement of claims, by outlawing deceptive advertising, and so on. The laws should pass and the sky should fall where it will.