As Congress considers an insurance industry bailout, the Consumer Federation of America (CFA) is charging that insurers are "unjustifiably" increasing prices in the wake of the Sept. 11 terrorist attacks. The CFA is also urging the nation's insurance commissioners to reject any proposals that weaken regulators' oversight of insurance rates and coverage.

"It would be politically embarrassing for Congress to put the taxpayer on the hook for the losses from terrorism while insurers hike prices beyond reason," says Robert Hunter, CFA's director and former Texas Insurance Commissioner

Hunter cites the following as "growing evidence" of price gouging:

• The cost of insuring Giants Stadium has increased from $700,000 to $3.5 million. (The New Jersey football stadium is across the Hudson River from lower Manhattan, the site of the Sept. 11 attacks.)

• Aviation underwriters have raised premiums for airlines by 200 percent to 400 percent.

• Reinsurers are eliminating terrorism coverage from their policies and raising their premiums 20 percent to 50 percent, or more.

While Hunter's comments are full of fury, the average consumer doesn't have much to get worked up about, says Joe Annotti, the assistant vice president of public affairs for the National Association of Independent Insurers (NAII).

"Companies that insure personal lines — autos and homes — have been affected very little," he says. "Most consumers' exposure to terrorism hasn't tremendously increased. I suppose if you have an apartment next to the Sears Tower, your policy premiums have increased, but that's in relatively few situations."

How much will it cost and who's paying?

According to the Insurance Information Institute (III), insurance claims from the terrorist attacks — which have totaled about $35 billion will have little impact on the cost of auto and home insurance moving forward. But the costs of property and liability for commercial businesses are expected to increase significantly.

In 2002, insurance premiums rose about 6 percent nationally for private homes and cars, the III estimates. The 2003 rate of increase for these insurance policies was about 2.5%. Premiums for commercial businesses, after decreasing for the past few years, increased by about 30 percent since September 11. However, in some markets (such as aviation insurance), rates have increased by as much as 400 percent. According to III, about half of the increase in commercial insurance rates reflect market forces created by the events of Sept. 11, including "the changing nature of risk and an increased demand for insurance at a time when available capital, particularly reinsurance, has shrunk drastically."

In consumer property and casualty insurance (auto and home insurance), rising repair costs, medical costs, jury awards, and even mold claims account for the need for "modest" rate increases across the country, says Robert Hartwig, III vice president and chief economist.

"Individual homes and cars are not terrorist targets," says Hartwig. "Increases are really unrelated to Sept. 11. Rates were flat for most of the 1990s. Now they are generally going up, but should mean a relatively modest $30 for the average homeowner and $50 per vehicle."

NAIC rejects commercial insurance deregulation

NAIC members have rejected adopting a new law that would exclude some lines of insurance from informing regulators of plans to increase policy premiums. "You would think that state regulators would be trying to figure out how to strengthen their ability to reject unwarranted rate increases," says Hunter. "Instead they are considering how to reduce their ability to protect consumers and small businesses at this time of great uncertainty."