Florida freezes rates of large insurance firm

September 10, 1992|By New York Times News Service

Florida's insurance commissioner took the unusual action yesterday of freezing the rates and premiums charged by one of the nation's largest insurance companies, the American International Group.

The commissioner also warned other property casualty insurers operating in the state that regulators would reject any unjustified rate increases sought in the wake of the devastation caused by Hurricane Andrew.

The commissioner's action against AIG came as a result of the publication of an internal company memo that described Hurricane Andrew as "an opportunity to get price increases now." The memo was obtained by a consumer group and distributed last week.

The memo, written on the day the hurricane wrought billions of dollars of damage on South Florida, has been cited by consumer groups as evidence that AIG, and perhaps other companies, planned to use the hurricane as an excuse to charge unjustifiable rates.

The chairman of the New York-based AIG, Maurice R. Greenberg, said the meaning of the memo had been taken out of context. It was written by his son, J.W. Greenberg, an executive vice president, and was sent to the company's top executives.

For years, the senior Mr. Greenberg has argued that premiums charged business customers were inadequate and he said yesterday that the memo simply reiterated the company's long-standing view.

In yesterday's action against AIG, Florida Insurance Commissioner Tom Gallagher said he and state Attorney General Robert A. Butterworth would investigate whether the company was actually trying to raise prices excessively and whether it was acting in violation of state antitrust laws.

In any case, a department spokesman added, Mr. Gallagher felt the memo showed a callousness on the part of an executive to the human tragedy taking place in Florida.

"AIG and all of the other companies who sell commercial, property and auto insurance in Florida better get this message now," Mr. Gallagher said. "We won't tolerate any company trying to take advantage of our citizens in the aftermath of this tragedy."

Mr. Gallagher's order froze the rates and premiums set by AIG in the state for 60 days. The commissioner announced he would hold a public hearing to look into the matter. Florida law allows companies to set rates first and then file them with regulators, who can then reject them.

The commissioner also sent a letter to the chief executives of the 780 companies licensed to sell property and casualty insurance in Florida. In his letter, he warned that his department would reject any efforts by the insurance industry to "capitalize on the misfortune of Hurricane Andrew's victims" through unjustified rate increases.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.