It isn’t often that we find ourselves in agreement with J. Robert Hunter, director of insurance for the Consumer Federation of America. The former Texas insurance commissioner and federal insurance administrator is a staunch believer in rate regulation for the insurance industry, where we at The Heartland Institute believe price controls stand in the way of allowing insurers to appropriately measure risk and for consumers to have access to the insurance products they want.
But despite those significant differences in perspective, there are areas where even we find common ground. One of those, covered in Hunter’s most recent paper on the property and casualty insurance sector, is the danger of catastrophe risk being moved from insurers onto state and federal entities – the Florida Hurricane Catastrophe Fund, Citizens Property Insurance Corp., the Texas Windstorm Insurance Association, the Terrorism Risk Insurance Program, the National Flood Insurance Program – where they will ultimately be borne by the taxpayers. We also agree that it is important that the full cost of catastrophe risk be reflected in insurance prices, to avoid subsidies and provide appropriate disincentives for risky development.
In this week’s edition of the FIRE Podcast, we talk with Hunter about his paper, about overcapitalization of the P&C industry and how to ensure that taxpayers are not made to finance risks that should be taken on by the private market.