CNN Starts Weeklong Katrina Series with Attack on Insurance Companies
With a tropical storm threatening Florida and the one-year anniversary of Katrina approaching, CNN‚Äôs August 28 ‚ÄúAmerican Morning‚ÄĚ kicked off a weeklong look at ‚ÄúRed Tape and Rubble‚ÄĚ in the Gulf Coast. But Ali Velshi‚Äôs first report in the series was unbalanced, treating insurance companies as guilty until proven innocent of greed or fraud.
‚ÄúWe‚Äôre going to be there when you need us,‚ÄĚ anchor Soledad O‚ÄôBrien said is the promise insurance companies extend out to policy holders, ‚ÄúBut many Katrina victims think uh, uh, that‚Äôs not true,‚ÄĚ she complained.
O‚ÄôBrien set the stage for Velshi‚Äôs unbalanced report by painting insurance companies as ‚Äútrying to get off easy‚ÄĚ as compared to customers who probably ‚Äúdidn‚Äôt understand their policies.‚ÄĚ
Velshi did show an insurance industry spokesman to point out that private homeowners insurance plans have never covered flood damage from any cause, including hurricanes. Dissatisfied with the argument that homeowners have a personal responsibility to obtain separate flood insurance, Velshi turned to Mississippi trial attorney Richard ‚ÄúDickie‚ÄĚ Scruggs, who attacked the industry for making a profit.
Altogether, the five companies Scruggs is suing on behalf of hurricane victims ‚Äúreported profits of more than $12 billion last year,‚ÄĚ Velshi complained, adding that 2005 was ‚Äúthe insurance industry‚Äôs most profitable year ever‚ÄĚ even after ‚Äúrecord policy payouts.‚ÄĚ
But rather than finding someone who would argue the insurance industry‚Äôs health amidst ‚Äúrecord payouts‚ÄĚ is good news for the economy and for the vast numbers of insurance claims paid out to hurricane victims, Velshi ended his story complaining that ‚Äúit wasn‚Äôt a profitable year for Cecil Tillman,‚ÄĚ a man suing his insurance provider, Nationwide (NYSE: NFS).
The American Insurance Association‚Äôs Julie Rochman pointed out that insurance company profits stemmed not from homeowners insurance but from other types of insurance such auto and fire coverage. What‚Äôs more, companies cannot pay out claims to hurricane victims from unrelated insurance pools.
‚ÄúTwo of the last 28 years we‚Äôve actually made money,‚ÄĚ Rochman said, referring to underwriting income ‚Äď meaning the industry takes in more in premiums than it pays out in claims. In fact, she added, ‚ÄúLast year in Mississippi and Louisiana, the insurance industry paid out the equivalent of about 20 years‚Äô worth of profits for those states.‚ÄĚ