Katrina fatigue was first mentioned, at least to my recollection, in conversation starting fall 07 when folks first began talking about the upcoming legislative session. Why the Legislature would be tired of Katrina is beyond me – but that’s a discussion for another day.
Katrina fatigue is the subject today and there’s more than enough to say – most of it written by or about Dean Starkman of the Insurance Transparency Project.
Starkman talked with the Mississippi Business Journal in March 2007 and gave the background for what has become Katrina Fatigue.
“The insurance industry was claiming its performance was exemplary post-Katrina,” Starkman said. “On the other side of the equation, there were claims of not just poor performance but widescale abuse of policyholders by the tens of thousands. What I thought was so interesting is that these weren’t just two slightly different spins on the picture. This is like two different planets.”
What he found remarkable is that there was no data to prove which side was right. All the data were problematic. For example, some of the insurance companies maintain that 98% of claims have been settled.
“All that means is that 98% of cases closed whether the policyholder was satisfied or not,” Starkman said. “It was just that they aren’t suing.
A little over a year later, those two different planets have never been further apart; and, the chief reason IMO is the media coverage of the insurance industry continues to make it difficult to know who to believe – and that, in turn, creates Katrina fatigue.
Starkman addressed the issue directly in The Trouble with Insurance Reporting and did it so well that I posted it as a permanent reference here on SLABBED by creating a new page, Perception, for the Insurance file (left sidebar)
This is about how arguments are framed in the tug-of-war between industries and the business media. Industries and companies have public-relations strategies, and there’s nothing wrong with that. Insurers, for instance, always say they had a terrible, horrible year, having “suffered” “catastrophic” “losses,” from man-made and natural “disasters” of one kind or another; and when that becomes impossible, as in 2006, when profits were over the moon, they say they will have a terrible year soon.
Starkman not only takes business reporters to task, he details the misrepresentation of the industry’s position in a way that make the information useful to others.
Many of you may be under the impression…that:
1. The insurance industry suffered terrible financial setbacks in 2005—the year of Katrina—the worst annual losses in the recorded history of insurance.
2. Triple-digit premium increases, while regrettable because of the additional burden they represent to struggling homeowners and their job-killing effects on the regional economy, were necessary to offset the risk from future hurricanes.
3. With their solvency at risk, insurers must also curtail coastal coverage, leaving the worst risks to inefficient, bureaucratic state-owned insurers.
4. Policyholders who chose to live near the coast and yet failed to purchase flood insurance from the National Flood Insurance Program are banking on public sympathy, tort lawyers, and demagoguing politicians to force insurers to pay for flood damage explicitly excluded from insurance contracts.
5. Insurance is a particularly risky business.
…all five notions are not only false, but demonstrably so, and while a couple of points are in dispute in some quarters, they shouldn’t be. Despite the fact that each of those assumptions lack support, my friends in the business media repeat them ad nauseam, distorting the insurance debate beyond all recognition.
At least now we know traditional media has been feeding these notions that have taken on a second life in the blogosphere over the past year. Maybe with Starkman’s article posted here on SLABBED, more will counter these notions with the point.
The point: just because insurers say something doesn’t make it so. The Audit only asks that industry assumptions be examined critically. This goes double for the so-called “wind-water” debate in which insurers, who don’t cover flood damage, assert in thousands of cases that rising water did all the damage while hurricane-force winds did none. Zero. As policyholders ruefully joke, Katrina must then have been history’s first windless hurricane. Spend 15 minutes down there and you realize the assertion is ludicrous.
And if you don’t think any of this matters, it is safe to say that you have not spent much time recently in Hancock, Harrison, and Jackson counties in Mississippi, or New Orleans, Plaquemines, St. Tammany, and St. Bernard parishes in Louisiana.
Either that or you are a heartless bastard.Oh, and you might also think that Gulf-coast insurance claimants are: 1. Illiterate. 2. Litigious. 3. Devious. 4. John Kerry voters. 5. Unable to understand the nature of a contract. 6. Something-for-nothing welfare cases and/or rich people fussing about second homes. 7. Not still living in FEMA trailers, inside of which one cannot properly swing a dead cat.
You would be wrong about that, too.
Be sure to read the full article and spread the word – it’s not about which side you’re own, it’s about being fair.
And listen, if you’re going to mention that the industry is on track to report record profits in 2006, you should at least mention when the previous record was set: 2005, the year of Katrina.
That’s right, the worst “loss year” ever was also the best profit year since ship owners began sharing risk together at Lloyd’s Coffee House in London in the eighteenth century. How can that be? Here’s a hint: the insurance world’s use of the term “loss” is a misnomer. It’s just a claim that’s paid and has nothing to do with the profit/loss we normally associate with an income statement, which, trust me, is what counts.
An insurer who complains about having to pay claims is like Ford complaining about having to make cars. It’s what they do.
Make that what they should do. Starkman wrote this article over a year ago and some claims are still unpaid.
Some may still file suit but the deadline is fast approaching. August 29 will be the last day under State law – I leave it to lawyers to explain any exceptions.- and there’s too much yet to be done here and over in Louisiana so there can be no rest for the weary.
according to what we hear here at SLABBED