Talk about piling on! Right after the cover story in "Bloomberg Markets" (headlined "Insurance Hoax") that I cited this week, "The New York Times" followed up on Labor Day with another devastating front page article, "Insurers Bear Brunt Of Anger in New Orleans." Read it and weep.
(To read the complete story, click here.)
While at least the Times acknowledges that insurers "may have" (do they doubt the figure?) paid out $11 billion to Louisiana residents for Hurricane Katrina damages, they go on to report that "they have also become a new villain in the tales people tell about the slow recovery here."
"Every neighborhood is full of horror stories about companies that reneged on their promises, offered only pennies on the dollar in settlements, dribbled out payments, deliberately underestimated the costs of repairs, dropped longtime customers and sharply increased the price of coverage," the Times reported--quickly adding, "it is not just talk."
While conceding that "traditionally, relatively few customers sue their insurance companies," the article noted there are about 6,600 insurance-related lawsuits in Federal District Court in New Orleans--3,700 of them still pending.
The Times also cited "thousands of formal complaints" filed with the Louisiana Department of Insurance--"4,700 of them in 2006 alone. That is just a tiny fraction of the number of people who feel aggrieved, regulators say: for half a year after the storm, calls to the department reached 20,000 a month." Yikes!
Indeed, the Times reports, "the usually eye-glazing topic of homeowners insurance is so incendiary now that State Senator Walter J. Boasso, a Republican turned Democratic candidate for governor, has proposed jailing insurance executives found to have acted in bad faith." (That would be quite a change from the norm, since in the past it has often been the Louisiana insurance commissioner who found himself in jail at some point!)
While insurers keep repeating the mantra that 99 percent of homeowners claims have been settled, the Times reports that "in New Orleans, many people say that just because they stopped fighting their insurers does not mean they are satisfied." One claimant was quoted as saying: “You’re so worn down by everything you’ve been through that you just don’t have the fight left in you.”
Bob Hartwig, president of the Insurance Information Institute, got his usual two cents in about the industry's solid performance and good intentions--but unfortunately two cents doesn't buy the industry much good will in the face of such intense dissatisfaction.
At least this time the reporters cited a second source in the industry's defense, quoting Joe Annotti of the Property Casualty Insurers Association of America. However, the article is so overwhelmingly negative that neither spokesmen can help but come across as apologists for an industry that turned its back on many of its most vulnerable policyholders.
What got my goat was reading that "insurance companies, which traditionally have made much of their profits by investing premiums until the money was needed to pay claims, are now paying back to policyholders less of the premium money they collect."
Could you imagine that? Insurance companies actually writing insurance for a profit! What a concept, especially for a business that traditionally posts a return on equity below most other industries.
In any case, it's more fuel for the fire for those eager to burn the industry at the stake.
Read the article for yourself and let me know what you think.
Comments (4)
With the broad-brush strokes utilized in these articles, you really have to wonder what part of the insurance business these reporters understand.
There is no specificity on the policy application in such circumstances. How many folks got Actual Cash Value pending replacement and are crying that they have been shortchanged?
It's so much easier to sell magazines and newspapers to consumers when you've got a vendetta going against some corporate entity.
This article further decries the lack of available insurance coverage. With the high likelihood of a repeat performance with another Cat 3 storm and no major improvements to the levee system, I guess it just plain makes sense.
Imagine a publicly held firm not wanting to have a repeat performance. What could they possibly be thinking?
In order to return some degree of transparency to the process, as I suggested previously, set up a claims tribunal to address such issues, with the results of disputes made public. That might dispel some of the biased jargon being promoted as journalism.
The insurance industry needs to shift the focus by addressing these charges head on. Let's see how many consumers want to accept the reality of their insurance coverage versus the taglines fed to them by the legal firms lined up to take advantage of the situation.
I don't believe for one minute that some blunders were made by insurers or their reps. With the lack of suitably-trained folks deployed, some errors were bound to occur. However to suggest an industrywide conspiracy is just ludicrous.
Posted by Marc Dubois | September 7, 2007 12:23 PM
Posted on September 7, 2007 12:23
I think there is a basic problem that will always exist in the insurance world. The consumer is paying money every year for a policy with certain limits and usually includes replacement cost. The premium is based on the company paying out these limits at time of loss, be it a partial or a total loss.
The problem starts when a customer has a loss and is told they will get a reduced amount of money and have to replace things to get the full amount. This is very hard for them to understand, and with the economy the way it is, the average American does not have the money to replace the damaged property to get paid the additional money--which is essentially owed to them in the first place.
One has to admit this policy language and pratice definetly hurts the industry's image. It would help if this policy language and or pratice was stopped.
Posted by Dave | September 10, 2007 1:43 PM
Posted on September 10, 2007 13:43
Here I am flogging the same fatally wounded equine again...
How many times must we get beat up severely before we take the time, trouble and spend some real money to educate our consumers on what to expect from insurance? I know I keep harping on this, but it falls on deaf ears, it seems.
Commercials and TV spots play nightly, beating down the competition, making light of other companies' alleged lack of full policy coverage, adding fuel to the fires of consumer dissatisfaction with our industry as a whole.
Sure, the sponsor wants to look good, but I think it backfires, because 30 seconds later the viewer forgets the company who sponsored the commercial and broadbrushes them with all the others--especially when reading all the negative press fallout following any disaster.
Nice going, State Farm! Digging our collective hole a little deeper, Good Neighbor!
Dave has an excellent point above. The consumer doesn't know what they're getting. They're more knowledgeable about buying a $50,000 automobile than a $600 insurance policy!
Quit beating the competition down to gain a miniscule piece of market share. Join together in informing and educating consumers on how to purchase coverage that protects them when they need it.
Sell them adequate coverage, and the increased premiums from that will help build a buffer to offset the higher payments that could result in time of a disaster.
If you want to be a Good Neighbor, or put them In Good Hands, or be anything to the public, be a Friend and be an Educator.
Posted by BJ | September 11, 2007 2:31 PM
Posted on September 11, 2007 14:31
We are the industry that people love to hate!
Probably the biggest waste of industry time and money is defending the insurance industry in the press. The public will believe everything bad about the insurance industry and believe nothing said in its defense.
Almost every insured has found themselves in the situation that they were not paid all they thought they deserved after a loss occurred.
All we ever hear from consumers is that the policy "should" have covered the loss in full, and that they were "cheated" by the "greedy insurance company" through the use of some "sneaky" exclusion the insurer put on their policy.
With a public mind-set like this, do you think any stories of good deeds will gain us any friends?
Posted by James Wright | September 19, 2007 11:33 AM
Posted on September 19, 2007 11:33