CNN Starts Weeklong Katrina Series with Attack on Insurance Companies
With a tropical storm threatening Florida and the one-year anniversary of Katrina approaching, CNNâ€™s August 28 â€śAmerican Morningâ€ť kicked off a weeklong look at â€śRed Tape and Rubbleâ€ť in the Gulf Coast. But Ali Velshiâ€™s first report in the series was unbalanced, treating insurance companies as guilty until proven innocent of greed or fraud.
â€śWeâ€™re going to be there when you need us,â€ť anchor Soledad Oâ€™Brien said is the promise insurance companies extend out to policy holders, â€śBut many Katrina victims think uh, uh, thatâ€™s not true,â€ť she complained.
Oâ€™Brien set the stage for Velshiâ€™s unbalanced report by painting insurance companies as â€śtrying to get off easyâ€ť as compared to customers who probably â€śdidnâ€™t understand their policies.â€ť
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 â€śDickieâ€ť Scruggs, who attacked the industry for making a profit.
Altogether, the five companies Scruggs is suing on behalf of hurricane victims â€śreported profits of more than $12 billion last year,â€ť Velshi complained, adding that 2005 was â€śthe insurance industryâ€™s most profitable year everâ€ť even after â€śrecord policy payouts.â€ť
But rather than finding someone who would argue the insurance industryâ€™s health amidst â€śrecord payoutsâ€ť 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 â€śit wasnâ€™t a profitable year for Cecil Tillman,â€ť a man suing his insurance provider, Nationwide (NYSE: NFS).
The American Insurance Associationâ€™s Julie Rochman pointed out that insurance company profits stemmed not from homeowners insurance but from other types of insurance such auto and fire coverage. Whatâ€™s more, companies cannot pay out claims to hurricane victims from unrelated insurance pools.
â€śTwo of the last 28 years weâ€™ve actually made money,â€ť Rochman said, referring to underwriting income â€“ meaning the industry takes in more in premiums than it pays out in claims. In fact, she added, â€śLast year in Mississippi and Louisiana, the insurance industry paid out the equivalent of about 20 yearsâ€™ worth of profits for those states.â€ť