(Mobile Press-Register) – The Consumer Federation of America (CFA), a consumer advocacy group, reports that property and casualty insurers booked near-record profits last year, continuing a trend that has cost the average American household about $870 over the last four years in unnecessarily high premiums.

For 2007, the companies that provide homeowners and auto coverage will make an estimated $65 billion after taxes, according to the consumer watchdog, not far below the 2006 level of $67.6 billion that represented their best showing ever. CFA, an umbrella organization based in the nation’s capital, is a good source of information relating to the insurance industry. Robert Hunter, the Federation’s director of insurance, says the profits are excessive.

The percentage of revenue paid to cover policyholders’ claims has dropped during the last two decades, according to the report. Last year, the estimated “pure loss ratio” was 54.6%, compared to 66.6% in 1987. The CFA found that the insurance companies have so much available money, they are acquiring other businesses and launching “massive” stock buybacks. Not surprisingly, a good number of the companies gave their top executives substantial pay increases.

Last year, the median pay package of insurance company chief executives was valued at $3.2 million, third highest among their counterparts in 21 industries, according to a recent analysis by The Conference Board, a New York-based business organization. When stock options and other forms of “non-cash” compensation are excluded, those insurance bosses ranked first, if the Conference Board figures are correct.

CFA wants state policymakers to look at a number of changes, including a ban on “unjustified geographic discrimination” and a requirement that private insurers provide an “all perils” homeowners policy offering flood and earthquake coverage. I believe insurance regulators at the state level must do a better job of keeping the insurers in line.

States like Florida are working hard to protect persons and to make sure the companies are doing the right thing. But, weak regulation has been a major problem in many states. Alabama’s Insurance Department has made some progress over the past few years, but most observers believe the agency could do much better. A lack of funding and inadequate staffing have made the department’s job more difficult. The CFA report gives a pretty good explanation of what all states are facing and offers some good recommendations.

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