CNN Starts Weeklong Katrina Series with Attack on Insurance Companies
With a tropical storm threatening Florida and the one-year anniversary of Katrina approaching, CNNâs August 28 âAmerican Morningâ kicked off a weeklong look at âRed Tape and Rubbleâ in the Gulf Coast. But Ali Velshiâs first report in the series was unbalanced, treating insurance companies as guilty until proven innocent of greed or fraud.
âWeâre going to be there when you need us,â anchor Soledad OâBrien said is the promise insurance companies extend out to policy holders, âBut many Katrina victims think uh, uh, thatâs not true,â she complained.
OâBrien set the stage for Velshiâs unbalanced report by painting insurance companies as âtrying to get off easyâ as compared to customers who probably âdidnât understand their policies.â
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 âDickieâ Scruggs, who attacked the industry for making a profit.
Altogether, the five companies Scruggs is suing on behalf of hurricane victims âreported profits of more than $12 billion last year,â Velshi complained, adding that 2005 was âthe insurance industryâs most profitable year everâ even after ârecord policy payouts.â
But rather than finding someone who would argue the insurance industryâs health amidst ârecord payoutsâ 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 âit wasnât a profitable year for Cecil Tillman,â a man suing his insurance provider, Nationwide (NYSE: NFS).
The American Insurance Associationâs Julie Rochman pointed out that insurance company profits stemmed not from homeowners insurance but from other types of insurance such auto and fire coverage. Whatâs more, companies cannot pay out claims to hurricane victims from unrelated insurance pools.
âTwo of the last 28 years weâve actually made money,â 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, âLast year in Mississippi and Louisiana, the insurance industry paid out the equivalent of about 20 yearsâ worth of profits for those states.â