State Farm: Bloomberg Markets Magazine Does Hatchet Job on Insurers
One embattled corporation is fighting back against unfair treatment by the media.
The September 2007 issue of Bloomberg Markets Magazine featured a 6,000-word assault on the entire property insurance industry featuring a hodgepodge of anecdotal evidence and suggestions of federal regulatory action.
The article entitled â€śThe Insurance Hoaxâ€ť was written by David Dietz and Darrell Preston. Its sub-headline read: â€śProperty insurers use secret tactics to cheat customers out of payments â€“ as profits break records.â€ť
However, Mike Fernandez, vice president of public affairs for State Farm, did not take the abuse lightly. â€śThe only hoax being perpetrated with your September broadside attack of the property and casualty insurance industry is that it masquerades as journalism,â€ť wrote Fernandez in a memorandum posted on the State Farm Web site.
Fernandez alleged Bloomberg recycled â€śthe same, few claim anecdotes being pushed to media outletsâ€ť and he said State Farm told Bloomberg that their company â€śsettles between 12 million and 13 million claims, every year. â€ť According to Fernandez, that makes it difficult to substantiate Bloombergâ€™s claim they â€śroutinelyâ€ť cheat customers.
The Bloomberg article makes the case for the federal government to shoulder the burden of regulating the property insurance industry over the state governments and even to invoke criminal statute in lieu of civil statute.
â€ś[Sen. Trent] Lott has introduced legislation to have insurers regulated by the federal government,â€ť Dietz and Preston wrote. â€śThat would supplant a patchwork system of regulation by states. Insurance has no body analogous to the SEC, which can refer cases to the Justice Department for criminal prosecution.â€ť
Bloomberg portrayed the property insurance industry as out to make a profit at all costs. â€śHomeowners whose properties have been destroyed by catastrophes contend with low payouts, higher premiums, software programs that underestimate rebuilding costs and sudden changes in policy values â€“ all of which have been calculated methods for insurers to increase profits,â€ť Dietz and Preston wrote.
But as Fernandez pointed out, Bloomberg completely ignored the record losses suffered by the insurance company five years ago.
â€śIn brief, insurance is a cyclical business (impacted by catastrophes, claims and financial market fluctuations) and our customers expect us to be good stewards of their policyholder dollars and be ready to pay claims when due â€“ whether profits are up or down,â€ť Fernandez wrote. â€śBloomberg failed to show the industry lost billions in the early 2000â€™s. State Farm lost nearly $8 billion from 2000 to 2002 â€“ record losses two years in a row.â€ť
Fernandez also pointed out the Bloomberg article left out important information about a source. One of the attacks was from David Berardinelli, whom Bloomberg referred to as a â€śSanta Fe, New Mexico, lawyer.â€ť But Berardinelli is also the author of a book, â€śFrom Good Hands to Boxing Gloves,â€ť that is a how-to guide for suing insurance companies â€“ and Bloomberg did not disclose that.
â€śAs someone who years ago worked for National Public Radio, served on the board of a regional newspaper chain, and have been both a consumer and fan of the Fourth Estate, I am appalled by the lack of journalistic ethics and wanton disregard for the facts shown by your reporters,â€ť Fernandez wrote. â€śTheir efforts may indeed not only mar the reputations and defame the companies cited, but cause them financial harm.â€ť