For years, Columbia Journalism Review has called attention to good reporting while skewering what it considers bad journalism in its "Darts & Laurels" column. Unfortunately, I believe the CJR organization deserves a "Dart" for dismissing complaints by me and the Insurance Information Institute about the accuracy and fairness of the "The Insurance Hoax"--the hatchet job in the September 2007 issue of "Bloomberg Markets" about the industry's claims-handling practices.
CJR reports that Bloomberg raised a ruckus after I complained to the New York City Deadline Club (of which I am a member and a past award judge) when I heard the article had been nominated for an investigative journalism award--in honor of the heroic Daniel Pearl, no less!
Citing misleading statistics in the article and complaining about its one-sided, broad-brush portrayal of the industry's claims performance during Hurricane Katrina (and beyond), I urged the Deadline Club to reexamine the nomination, which they did. (To read the Bloomberg article, click here.)
The article did not win any Deadline Club awards--although, much to my chagrin, it was cited later on by the New York Press Club, with its award for consumer reporting. (I am not a member of that club and did not know the article had been nominated there, otherwise I would have protested to that group as well.)
In any case, this started a whole brouhaha.
On May 27, Matthew Winkler, Editor In Chief of Bloomberg News, wrote a letter to Tim Paradis, president of the Deadline Club and an Associated Press reporter, to "express our dismay at the way in which the integrity of the judging was compromised..." (To read the entire letter, click here.)
Mostly, they were upset about industry officials, both named (like Bob Hartwig, president of the Insurance Information Institute, who has been engaged in a nearly year-long battle with Bloomberg over the article's tone and accuracy) and others unnamed.
However, they also were pretty pissed off at me, citing my April 3 blog decrying the nomination and urging readers to protest to the Deadline Club.
"Friedman’s campaign had an impact," wrote Mr. Winkler, who characterized me in his letter as "a frequent defender of the insurance industry," as well as someone who "regularly appears as a speaker at industry functions..."
I knew Bloomberg and company would dismiss me as some industry shill. But as my loyal readers know--with many of the you in the industry having felt the sting of my pointed barbs--that's a bunch of hooey!
Indeed, any regular reader of my blog or NU column would probably be more likely to characterize me as "a frequent critic of the industry." To refresh your memory, just check out my harangues against the mega-brokers after the contingency fee abuse and bid-rigging scandal, the book-cooking by AIG using bogus finite reinsurance purchases, and, yes, the industry's often poor handling of Hurricane Katrina claims. And don't get me started about the horrors of the health insurance industry.
In addition, Bloomberg might be unaware that a substantial part of NU's readership, (15,000 subscribers) are in fact consumers--corporate insurance buyers including risk managers, CFOs and others who assess exposures and, in some cases, purchase insurance to cover them and loss control services to prevent them.
If this consumer audience ever believed that me or my magazine were shameless apologists for the insurance industry, they would send us packing. Instead, we've grown tremendously among the buyer crowd in terms of name recognition, respect and influence.
As for the fact that I "regularly appear as a speaker at industry functions," I am guilty as charged. But, frankly, who else would have me speak? As a business journalist covering the insurance industry full time, I cannot imagine a paint manufacturing conference asking me to talk about trends in their field.
Is Bloomberg suggesting I am bought and paid for by speaking fees? Perhaps, but the fact is I have never been paid to speak to any group I've addressed. (I was offered a paid gig recently, but turned it down.) I do speaking engagements to raise NU's profile and build on my reputation as an opinion leader, not to pad my bank account or solicit kickbacks from the industry I cover.
However, Bloomberg's letter did make one point that gave me pause: "Friedman never took the basic journalistic step of asking Bloomberg to comment on the 'Insurance Hoax' before he condemned it as a 'hatchet job' in his online column."
If I was working on a news story, I would absolutely agree--that's not fair. But in an opinion piece in an online blog, the journalistic ethic is murkier.
Still, it could not have hurt to seek out Bloomberg's opinion at the time. I was just so taken aback by the overwhelmingly one-sided attitude permeating the piece, as well as the way they presented their statistical "facts" and failed to distinguish the nuances within this vast industry, that I rendered my verdict based on the article as it stood--just as any reader would.
Of course, Bloomberg's people and anyone else are welcome to respond to anything I say, right here on my blog. That's what the comment section is for.
This battle--"pitting journalist against journalist," as CJR characterized it--was detailed in an July 8 onlne CJR column by Dean Starkman. As part of his "audit," he solicited my take via e-mail, and we had a rather lively but polite exchange. He also spoke with Bob Hartwig to hear out his complaints about the facts supporting the story.
Unfortunately, Mr. Starkman concluded that "a review by 'The Audit' found no significant factual errors and no errors at all involving the insurance industry. The [Insurance Information Institute's] allegations are unfounded." (You can read his entire post by clicking here.)
In his posting, he reported that "...where I saw strength, critics saw weakness. They believed the story lacked balance and unfairly used anecdotes, even if true, to tar an entire industry." A point-by-point rebuttal by Mr. Hartwig and my blistering critique failed to convince him about the article's shortcomings.
That's really too bad. We'll just have to agree to disagree.
Mr. Starkman quoted me extensively in his piece, noting that: "In an e-mail to me, Friedman says that if he influenced the [Deadline] Club, 'so be it.'”
Indeed!
He also went on to quote my e-mail in stating my main objection, which was that "...the article painted the entire industry with a single brush, which I feel is unfair, considering that the overwhelming majority of Katrina claims were, in fact, paid, and that the industry laid out tens of billions to rebuild these flood-prone areas—often when the cause, wind or flood, was not clear."
Frankly, I just chalk this up to more of the same--the fact that the bulk of those in the media covering insurance (and assessing the performance of reporters doing insurance stories) just don't understand how this business works, let alone appreciate how much it means to society and the economy.
Mr. Starkman raises the issue himself in his post.
He says that insurance is a "backwater in the mainstream business press," which is absolutely right, although I would dispute his conclusion that because of this, "its actors are thus unused to serious, arms-length scrutiny."
In fact, all the industry ever gets is negative press. Part of the problem is poor public relations by the industry. (Perhaps the Insurance Information Institute, beyond publishing their useful annual "Fact Book," should offer at least an online introductory seminar for journalists covering the industry.)
But it's also the old "man bites dog" problem--no one thinks an insurance story is news if billions in claims are paid and lives, homes and businesses are rebuilt; they only send reporters when there is a dispute of some sort.
Mr. Starkman correctly goes on to note that "insurance is a difficult beat that requires immersion in an ocean of obscure ratios and facts and long, grinding arguments over their meaning with an adroit research operation headed by Hartwig, a Ph.D. Suffice it to say that from a career point of view, most business reporters find the beat unrewarding."
The result is that insurance news--good and bad--is under-reported or blatantly misreported. And when reporters are assigned stories, too many don't know what they are talking about, or falsely assume that all insurers, as well as their adjusters and agents, are crooked.
(Mr. Starkman made another interesting point about claims metrics that is worthy of a blog of its own. I'll tackle that point next week.)
I'm sorry Mr. Starkman didn't see the Bloomberg piece my way. Perhaps I'll even be hit with one of CJR magazine's dreaded "Darts"--although I would grudgingly wear it as a badge of honor in this case. The Bloomberg article simply did not capture the "truth" behind this story. A few bad actors does not an industry make, whether the field is insurance or journalism.
Comments (4)
As I told you much earlier in this series of blogs on this topic, you are wrong about Bloomberg's piece. CJR was right to call you on it.
Indeed, when all the facts on claims practices are known, Bloomberg's article will be seen as not only accurate but prescient.
Posted by Bob Hunter | July 17, 2008 1:58 PM
Posted on July 17, 2008 13:58
Bob Hunter may well be right that a lot of claims practices are unsavory, but this is still a poor piece of journalism.
He suggests that all the facts about claim practices are not known, yet you wouldn't know it by the conclusions reached in the Bloomberg article.
The reporters took a few selected cases, sprinkled in some questionable statistics and quoted a handful of industry critics. The article lacked perspective and context.
We deal with national reporters on a regular basis and have dealt a few times with Bloomberg. Its reporters often write like they're shooting to win awards rather than seeking insight and truth.
Sam, your campaign to shed light on unsavory journalism is commendable.
Posted by Dennis Jay | July 17, 2008 9:46 PM
Posted on July 17, 2008 21:46
Not all members of Congress are on the take, nor are a majority of them people who are calloused about the public. If you look at the polls, the approval rating is abyssmal. Congress is broad brushed.
If you study the steroid era in baseball, a majority of the players did not juice. The era remains tainted and has been broad-brushed with the previously listed label (steroid era). Several players where indicted and convicted in the press without proof just because a few bad apples did cheat and don't want to admit that fact.
When several major players (AIG, Allstate, and others) misbehave, the public will be suspicious of the entire industry as these companies are viewed as representative of the industry.
Are we misunderstood as an industry? Yes. We are not the only ones.
I (like you) do not apologize for our industry and will readily criticize it when deserved. If you look at the good our industry has done, it outweighs the bad.
We are roundly criticized, just like attornies. To whom does everyone turn when they are in trouble? The answer is, their insurance agent and their attorney.
There is a positive side to the criticism. It tends to force the companies who are misbehaving into reforming their ways. They will then likely try to find another way to avoid doing what is right. At least temporarily, they will behave better. That is the role of the consumer "police."
Thanks, Sam, for being our "policeman" to protect the reputation of those who do not behave poorly.
All of our clients who were affected by Katrina have long since rebuilt because we paid our claims within three weeks of the catastrophe. We were one of those that you mentioned who paid claiims under wind when water may have been the cause, but it was unclear.
I wish CJR and Bloomberg would contact me.
Posted by Craig Dolan | July 18, 2008 8:59 AM
Posted on July 18, 2008 08:59
I'm now into writing a blog (http://magnumforc.blogspot.com), and my latest entry is on the lack of preparation or foresight for the fire season here in California.
We're seeing a repeat of 2003 and 2007 up north--albeit in sparsely populated areas, thank goodness. But the firestorm is certainly coming to more urban areas as the wilderness/urban interface narrows to a blur.
I've been trying to educate people without pontificating or preaching, but sometimes it's like talking to the wall.
Friday, July 18, 2008
Underinsured or Overconfident? The Next Fire Will Tell!
It's been about ten months since the last huge wildfires in Southern California, and the winds of change haven't blown all that much sense into many citizens, in either insurance savvy or fire prevention.
Some still have not prepared a defensible space around their homes by clearing brush, dead grass and debris to at least the property line or 100 feet minimum, and many still have those old wood shingle roofs when they could have replaced them by now, considering the 2003 and 2007 fire seasons and the warnings from fire officials for many years before and since, that homes with those type roofs just are not defensible against wildfires.
As for insurance, it's the same old game. How can I get the insurance coverage and make the bank happy, while not actually covering the appreciated or real value of my home. In that way I can save some premium dollars and be really insurance smart. After all, my insurance agent is okay with that and has been all along...
You could be right, but who is on the hook for the loss when the embers die down and the smoke clears. YOU! You with the under insured home and who cannot replace it for the values you stated were correct when you took out the coverage.
Did you think you could have even committed fraud when you signed those documents indicating everything you stated was true to the best of your knowledge?
If that were pursued, my friend, you'd be left with no coverage, and just a scorched piece of concrete slab you used to call home with no insurance money to rebuild anything! Think about that for a moment!
Let's think about depreciation, appreciation and all the things that happen during the good and bad economy that we're seeing right now.
You bought that house for $500K and it's value, including improvements like the swimming pool and interior work helped it soar to $900K over six years.
Then the market plunged over the past two years and now it's worth $400K, less than you paid for it, much less than you have invested in it, and maybe less than you owe based on the mortgage and home equity lines, etc.
If you didn't keep the insurance-to-value up on your home as you made improvements, you would likely be woefully under insured should a loss occur.
Since the house has depreciated, some people think that it will cost less to rebuild. Not so. The cost of building materials, fixtures and labor will be significantly higher than they were when your home was built, so even though the value placed on the home as a "real estate sales price" might have tumbled, the actual cost of rebuilding will be lots higher than it was for the original dwelling.
Another factor lots of people fail to recognize is the "economy of scale" when a builder completes a development. If you own a tract home, the builder has the benefit of contracting for or purchasing materials at a good savings to build dozens, or even hundreds of homes at one time.
That economy is lost when a builder must "spot build" one home. In addition, should the new home have to be rebuilt between existing dwellings that have survived a fire, there are extra costs as restrictions in movement, the cost of cranes or specialized equipment to move equipment and materials over or around adjacent structures to reach back yard areas, have to be included in the costs of rebuilding.
The bottom line is to sit down before the time of loss and pore over your insurance policies and see if you have enough coverage.
If you have a replacement value policy, does it cover enough of the replacement value to actually make you whole again, or will it leave you partially rebuilt. Increasing your coverage is as easy as sitting down with your agent or broker, or a phone call to your insurance company, and discussing your needs and what is realistic coverage for your home, business and contents.
Once the flames come calling at your door, it's too late to wish you had made the call earlier, because by then, it's too late.
Which reminds me of one of my favorite sayings:
"After you jump, it's too late to wish you bought the better parachute!"
Posted by BJ | July 18, 2008 5:38 PM
Posted on July 18, 2008 17:38