Consumers Beware

I just attended Consumer Federation of America's Consumer Assembly in DC and came away afraid to eat food, go on the internet or drive a car. It's a dangerous world, folks.

The meeting featured a speech by Rep. Henry Waxman, who told us health care reform was a priority and explained his belief in the government's role in protecting consumers. Refreshing! Waxman wants minimum health care standards, more emphasis on prevention, and a system of community rating. I am very happy Waxman is in there protecting us.

Consumer's Union presented great material on current attitutes about health care. As you may suspect, people are not optimistic about health care reform, and their costs keep rising.

Another frightening area under discussion is "behavioral marketing." Corporations are tracking consumer behavior in more ways that ever, from loyalty cards at your drug store or grocery to Facebook and Google following your every move and saving everything you type into your computer. Using that information, they design ads just for you!

Consumers need to demand transparency and control over their personal information. Google's whole business model is built on creating applications (like Blogger) that attract consumers so that information can be collected. Is this technology beneficial to consumers? Google would say it is, and many consumers that use their products will agree, but uses of information can be insidious.

For instance, while Facebook had a public controversy over their decisions on using customer data and ended up increasing privacy, one often encounters "apps" on their site that use the data if one agrees. They are not bound by Facebook's policies although users may assume otherwise.

Of course, by this time, most everyone knows there is little or no privacy on the internet anyway. Your every move and work can be and is tracked. Attempting to become actually private is difficult, if not impossible.

Senator Chris Dodd talked about financial reform. There are two main ideas at present: The Financial Product Safety Commission and a usury limit. There is no question major financial reforms are needed and these are two good ideas. We support them. A usury limit of 35% will shut down all the pay day loan places. Imagine that! I'm shocked anyone would pay more than that anyway.

Food safety is another imperative. It turns out nobody is really watching our food. Obama has put some people on the case, but it may be that the best solution would be to take Food out of the FDA, which focuses more on drugs. Good idea. Under Bush, food inspections were curtailed in favor of "self-inspections" which really means no inspections.

Lastly, we talked about closing the "digital divide." Turns out the digital conversion may help, in that more people could leave cable behind. And the divide itself is growing larget. Verizon's fiber optic cables will be able to deliver 100 mbs of data compared to the current top speeds of 3 to 5 mbs. It is hard to imagine the changed that will occur.

Finally, check out this new consumer resource, The Consumerist.

Some insurance items for the 2009 Legislature

Its a tough year in Tallahassee, all right. They are looking for cover where none exists. Some say our legislature is a kind of "Lost World" above the mists, hosting prehistoric dogmas long extinct in the rest of the world. Minimum, they are channeling the eighties.

Regardless of worldview, the Legislature must tackle insurance along with the economy, taxes, environment, and other issues. We have a few suggestions.

We have a new chair of the Senate Banking and Insurance Committee and he is a banker has no background in insurance. Surely, the industry insurance lobbyists are chagrined by this turn. While he might be unformed putty in their hands, he probably lacks the expertise to be effective. Insurance is complicated and there is a steep learning curve. We hope Chairman Richter doesn't simply follow the lobbyists, but tries to maintain his bearings.

We only see one thing on insurance, and that is to maintain prior rate review, also known as "file and use" as opposed to the opposite. We feel this system has worked well and allowed the insurance commissioner to stand up to insurers. However, there may be a proposal for "flex-rates" on the table that we might find acceptable, if coupled with prior rate review.

Also on insurance, and this isn't a priority, but is being talked about, is unfreezing Citizens rates. FCAN has always maintained that rates should be actuarially sound. That means some Citizens rates should go up, but others might go down. The Legislature is scared to move on this, and may do nothing, which would unfreeze rates.

The Citizens question is all part of the greater problem of the state having too much risk in the event of a large hurricane that caused say $35 billion or more in damage. The state could borrow funds to make up the difference, but that would be difficult. Ultimately, the state needs to reduce risk, and that means spreading risk outside the borders of the state and reducing risk within the state.

One mechanism to spread risk is re-insurance. There is some availability of money in international capital markets, but the general financial unrest has shrunk the pool of available capital and raised the cost. We should still investigate purchasing some re-insurance for the Cat Fund, rather than rolling the dice on another hurricane.

A second option is to reduce risk in the state, and the way to do that is through mitigation, or strengthing homes and not putting them in risky areas. Gov. Crist has unwisely cut the My Safe Florida Homes program which was designed to inspect and retrofit homes. If we're not going to have that, then we need beefed up discounts from insurance companies. Insurers complain about discounts, but it is really an investment by them and they do reap the benefits.

There are those in business circles that suggest we end rate regulation altogether. That is not a sound proposal because consumers are often required to buy insurance and do not understand their policies. That would leave them very vulnerable. Hopefully, we have learned the folly of unregulated markets. Instead, let's make sure rates are fair and encourage competition. More small insurers are moving into the Florida market, and we should make them welcome with risk mitigation programs and discounted reinsurance.

Just a few ideas.....