I now try to avoid telling people how many years I’ve run both my own accounting practice and helping my much larger private sector clients prosper in one of the most competitive industries in our economy so I don’t betray the fact I’m on the fast downhill slide to the big five-oh. That said and in light of true participation in the market economy of this once great nation there are times I read something in a national finance publication and I wonder which ivory tower these people have been smoking crack in. So along those lines through time I’ve blogged here on Slabbed the folks over at the Wall Street Journal have come up a time or two.
Sadly I must report I did say the WSJ Editorial Board were a band of “lit and hallucinating buffoons” but that was only because they were unfavorably comparing a solvent state-run insurer of last resort in Florida Citizens with an insolvent one in Louisiana Citizens. The stupidity was simply stunning folks but these Ivory Tower sellouts are the same bunch that gave us the 2008 market crash and 10+% unemployment with their self-serving no-regulation rhetoric so I frankly should have never expected much from ‘em.
And it is also true that late last year I skewered a couple of the WSJ beat reporters for passing off PR fluff from Allstate as a serious news story but again this group probably also buys into the concept of big business being able to impartially self investigate their own misdeeds but hey don’t take that from me as Sam Antar aka of “Crazy Eddie” infamy and one of the most famous fraudsters of all time discusses that issue in-depth on a sister new media website to Slabbed, the Business Insider. The bottom line is it is against that backdrop that I highlight another incredibly clueless Hurricane Irene/Insurer of Last Resort story by the WSJ dynamic duo of Erik Holm and Leslie Scism where their main source was some cat named “Critics“. A search of our Slabbed files revealed one of the Insurance disInformation Institute’s Bob Hartwig’s aliases was indeed “Critics” so it is easy to identify what industry PR outfit fed Holm and his sidekick this “Hurricane Irene” story which rests on the following undisputed assertions from Mr Critics:
- 1. The cushions of the state windpools are at risk from actually having to pay claims.
- 2. Rates are too low thus the states themselves are at risk once the reserves are exhausted.
- 3. Inland taxpayers and ratepayers are somehow subsidizing people to live in beach houses.
What the story doesn’t say is:
- 1. Many state run windpools are restricted from building up reserves and denied access to the same capital markets the private insurers tap.
- 2. The anti trust exemption the insurance industry enjoys prevents risks from perils like Hurricanes from being spread, which is also a basic tenet of insurance solvency theory.
- 3. The state wind pools are the brainchild of the insurance industry itself and designed to be as financially painful on the consumer as possible. To the extent that same bunch bitches about same also tells me there is also another financial angle in play of which they do not speak.
- 4. Paige St John exposed that other angle over at the Herald Tribune with a series of articles that won the Pulitzer Prize. The series detailed how insurers like State Farm are selling expensive reinsurance to the State Wind Pools from offshore tax havens.
- 5. The insurance industry is a oligopoly which means that coupled with the anti trust exemption there are lots of opportunities to price fix.
- 6. It is certainly true in Mississippi and likely true in all the coastal hurricane states that the coastal areas generate a disproportionate share of the state’s economic output thus exposing the inland insurance subsidy argument as BS. Far from a subsidy these setups should be viewed as an investment and a damn good one at that. I think even our own Boss Hogg would agree with that.
Now if the WSJ is content to let insurance industry blow smoke up their asses and pass that off as news all I can say is News Corp will be News Corp folks and them guys are not known as a bastion of journalistic ethics. That said we are very curious souls here at Slabbed and just last night I was wondering what would happen if Hurricane Irene were to bypass the North Carolina coast then taking a left hitting midtown Manhattan and the Insurance disInformation Institute before going up the III’s Bob Hartwig’s rectum. Luckily for me, Nate Silver over the New York Times 538 blog uses rigorous statistical analysis to determine the answer, which did not come as a surprise to this jaded but seasoned observer of the insurance industry: It will take a Cat 5 to dislodge all the bullshit from Hartwig’s bod and the resulting collateral damage could run to the trillions. One beneficial side effect is the dislodging of the many heads from perpetual rectal insertion in Washington DC so the overall impact could turn out a net economic positive over the longer run.
I’d like to thank our own Brian Martin for alerting me to this propaganda piece and I hope he reprints his letter to the editor regarding same in comments.