CBS Attacks Insurance Companies for Making Money
Even while insurance companies paid out a record amount in claims after Hurricane Katrina and other storms, the industry still made more than $44 billion in profit, an almost 19-percent increase from the year before, said CBSs Sandra Hughes on the April 5 Evening News, introducing a critic of the insurance industry.
Theyve used a national disasters like 9/11, natural disasters like Katrina and phony excuses like too many lawsuits to jack up peoples premiums, said Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights (FTCR).
FTCRs leanings are decidedly liberal. FTCRs list of proud accomplishments includes working against Republican California Gov. Arnold Schwarzeneggers 2005 ballot initiative on public pension reform and publishing a study accusing oil companies of slowing down oil refineries to inflate gasoline prices artificially.
Springboarding from Rosenfields complaint, Hughes charged that insurance companies protected their profits by purchasing their own insurance policies. Its called reinsuring, and the policies come mostly from Europe.
But in order to stay in business which means insuring customers who need it companies must reinsure themselves. According to the Insurance Information Institute, an insurance companys willingness to offer disaster coverage is often determined by the availability of reinsurance. The Institute also reported in December 2005 that about half of the estimated $34.4 billion in Hurricane Katrina damages would be paid by reinsurance policies held by insurance companies.
At least one reinsurance company, Lloyds of London, saw a pretax loss in 2005. Although the Associated Press reports Lloyds suffered a $181 million pretax loss for 2005, company chairman Lord Peter Levene was quoted characterizing the downturn as just a small loss that represents an excellent performance by the market. Levene also added that 2005 saw more payouts in insurance claims than September 11.
Without reinsurance firms like Lloyds, American insurance companies might have faced losses in 2005 or withdrawn altogether from offering policies in the Gulf Coast. CBS didnt address that possibility, which would be unfortunate for the companies and consumers alike.
The Business & Media Institute has previously documented the medias treatment of the insurance industry.