Even in the best of times, the insurance industry has neverenjoyed the most stellar public image. For most consumers, coveragealways costs too much and claims are never paid quickly enough.

But in the worst of times, when insurers are accused ofknowingly misleading or even cheating policyholders, the politicalconsequences can be overwhelming.

Insurers were certainly on the hot seat in 2007, mainly becauseof the lingering fallout over disputed Hurricane Katrinawind-versus-water claims. There were two particularly low momentsthat jump to mind.

One was at the end of February, when I witnessed a Congressionalbashing of the industry firsthand. Rep. Gene Taylor--theMississippi Democrat who made it his mission to punish insurersafter his own Katrina homeowners claim (since settled) was denieddue to the flood exclusion--was both witness and interrogator at ahearing of the House Financial Services Subcommittee on Oversightand Investigations.

Allegations were raised of adjusters forced to alter reports sothat Katrina losses could be blamed on uncovered flooding. On abroader scale, the industry was criticized for reporting highprofits the prior two years, while many Katrina claims wereunfairly denied or stalled. Charges of collusion were voicedwithout any hard evidence to back them up, but the damage wasdone.

Robert P. Hartwig, newly installed as president of the InsuranceInformation Institute, was the sole witness for the industry'sdefense, yet he was more of a sacrificial lamb--his retorts mostlyfalling on deaf years as members took turns skewering insurers foralleged misconduct.

The second low point was publication of a cover story in theSeptember edition of Bloomberg Markets, with the devastatingheadline: "The Insurance Hoax." The article went on to document ingreat detail how major carriers were allegedly adopting a policy ofdenying legitimate claims whenever possible to boost profits.

"The insurance companies routinely refuse to pay market pricesfor homes and replacement contents, they use computer programs tocut payouts, they change policy coverage with no clear explanation,they ignore or alter engineering reports, and they sometimes asktheir adjusters to lie to customers," the article charges, withmost carriers declining to comment because many of the disputeswere still in litigation.

"As Mississippi Republican U.S. Senator Trent Lott and thousandsof other homeowners have found, insurers make low offers--or refuseto pay at all--and then dare people to fight back," the articleadded. (The fact that Republicans and Democrats can set aside theirbitter rivalry to gang up on the insurance industry shows howdeep-seated anti-insurer resentment runs.)

Insurer integrity was also called into question in Florida, forfailing to lower rates sufficiently following passage of areinsurance support bill, and in California, when carriers wereblamed for so many homeowners being underinsured when wildfiresravaged the state).

The backlash was considerable, with talk of removing theindustry's federal antitrust exemption, thousands of lawsuits filedto challenge the standard flood exclusion, and a drive in Congressto add wind coverage to the National Flood Insurance Program.

But the bottom line is that little has changed. Insurers settledmany disputed claims by paying at least partial damages, but thebasic flood exclusion has survived. McCarran-Ferguson's antitrustimmunity remains intact, and the NFIP is still flood-only.

Meanwhile, I spoke out on a number of occasions in my column,blog and in public appearances about the need for insurers to bemore proactive with the media in good times and bad.

Often, I felt like I was talking to a wall, but there were somesigns that at least a few industry leaders--such as David Sampson,the new president and CEO of the Property Casualty InsurersAssociation of America--understand what needs to be done to createand sustain a more positive image.

In the short term, with Sen. Lott leaving the Senate by year'send, insurers are being relieved of one major critic who backednumerous bills to either investigate or regulate the insurancebusiness.

With the number of outstanding Katrina claims dwindling, andeven the property market softening, insurers should have anopportunity to catch their breath and regroup--at least until thenext inevitable mega-disaster or scandal hits.