Insurance Law Center: Catastrophic Loss: Insurers "Adversarial"? Bloomberg Report "Intellectually Shabby"? Insurance Scrawler Marc Mayerson Weighs In

Catastrophic Loss

1/17/2008 7:03:03 PM EST

Insurers "Adversarial"? Bloomberg Report "Intellectually Shabby"? Insurance Scrawler Marc Mayerson Weighs In

VP LexisNexis

Lawyer and blogger Marc Mayerson generated a good bit of comment, and some useful links, in his post on the back-and-forth between Bloomberg and the insurance industry. Bloomberg reporters wrote that “when there's a disaster, the companies homeowners count on to protect them from financial ruin routinely pay less than what policies promise. Insurers often pay 30-60 percent of the cost of rebuilding a damaged home--even when carriers assure homeowners they're fully covered, thousands of complaints with state insurance departments and civil court cases show.” The reporters added that “paying out less to victims of catastrophes has helped produce record profits” for the industry. Ouch!

Not one to sit back and take it, Robert P. Hartwig, president of the Insurance Information Institute, wrote a letter to Bloomberg, available from Mayerson’s site, where he shared his incredulity. “I find it baffling that a sophisticated business-oriented magazine that is part of one of the most respected names in business information services chose to publish such a biased, inaccurate and intellectually shabby story.” Zap!

Mayerson wrote, among other things, that while insurers do indeed pay claims everyday, the industry needs to address the “wide-spread perception that at the point of claim insurers adopt an adversarial posture.”

“Experienced, thoughtful observers of the industry have written about this at length (and the linked article is I think the most important thing ever written on the P-C industry), and the point of first-party insurance bad-faith law in part is to counterbalance the power imbalance that insurers hold over their insureds at the time of claim -- at the time their insureds are most in need and dependent on their performance, which explains the emotional oomph that typifies through-the-eyes-of-insureds' reporting on insurers' claims-paying (or claims-denying) practices.”

Whatever side you're on, the post has some useful links. For the rest of it, plus comments and other articles, go to the Insurance Scrawl.

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WilliamT.Barker
Last Post: 2/19/2008 2:02:12 PM

Subject: Insurers "Adversarial"? Bloomberg Report "Intellectually Shabby"? Insurance Scrawler Marc Mayerson Weighs In

Date Posted: 2/19/2008 2:02:12 PM

As the Hartwig letter notes, the Bloomberg article relies on anecdotal reports of disatisfaction by insureds and claimants with the payments they received. But it nowhere supports those complaints with any demonstration that the insureds received any less than their policies called for. Without any such evidence, the claim that insurance is a "hoax" is itself a hoax.

Almost every insured whose claim is denied or who receives a lower payment than expected is dissatisfied. And at least some of them are rightly dissatisfied. Claim adjusters being human are imperfect and sometimes make mistakes, occasionally bad mistakes. Moreover, it is sometimes unclear whether or in what amount a claim should be paid. In such cases, the law allows an insurer to test the claim in court, by denying it and awaiting suit. That is an imperfect result in cases where it turns out that the claim should have been paid. But the alternative is to pay every claim that even might be proper, and that would greatly increase the cost of providing insurance. Increases in that cost necessarily inflate premiums, even though many of the claims paid would not actually be covered under the policy language.

My friend Marc Mayerson urges that insurers be required to all doubts in favor of insureds. While that would greatly help his policyholder clients with their claims, purchasers of insurance would not like the consequnces of such a rule. If there were a market for broader coverage, one would expect the policy language to be altered to respond to the demand.

As Marc says, bad faith law can provide a remedy for those who are subjected to abusive denials. If that remedy is claimed to be inadequate, the burden of showing that rests on those advocating change.

Bill Barker

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