Was State Farm–its longtime advertising claims to the contrary–not a good neighbor when it came to dealing with the multitude of Hurricane Katrina claims in Mississippi? Did this really have to end up in court? Or should the carrier have been more proactive and flexible in adjusting claims where the source of normally excluded water-related damage was less than clear?

I've been hearing grumbling within the industry that while the assault on the standard flood exclusion is alarming, State Farm practically invited legal challenges and public scorn by the way it adjusted those claims and stiff-armed the unfortunate homeowners affected. The result was another body blow to the industry's already tarnished reputation–a problem that reverberates far and wide through onerous state and federal legislative initiatives.

I got an earful from one major insurance industry official in an e-mail following the announcement of the Katrina settlement (still a work in progress, with the judge on the case rejecting the first agreement–see yesterday's blog entry). This individual–clearly frustrated by the response of carriers to wind-driven, water-related claims–complained about how much better insurers could have handled such disputes and perhaps not only have avoided the lawsuits and horrible publicity that followed, but set the stage for improved relations with regulators and the public going forward.

“What I'd really like to ask State Farm (and others) is why on God's green earth didn't they go down there right after the storm and [settle these claims]? Our industry is obsessed with talking about image building and reputation management. In my view image and reputation are based on behavior, not a PR campaign. Treating consumers well and honoring our social/moral contract (not just the legal one) seems like the best way we can do this, particularly after a disaster,” wrote my correspondent, who insisted on anonymity for obvious reasons, but was unable to keep silent about the way the industry so often talks the talk, but fails to walk the walk, when it comes to putting policyholders first.

“I know all the problems with the cost of fraudulent claims and setting dangerous precedents,” this individual concedes. “But how much did it cost in terms of public animosity–not to mention the cost of the ultimate settlement–to deny these claims and have your name dragged through the mud for 18 months? And how much more receptive would regulators and legislators be to requests for future rate increases when insurers can demonstrate that they went the extra mile to serve consumers?”

This all harkens back to a panel discussion I took part in last June in San Francisco at the Insurance Marketing Communications Association on repairing the industrys damaged reputation. My main point, which I covered in an earlier blog entry last fall, headlined “Perception Is Reality,” was that “the problem is not the perception of the industryits the reality of insurer and broker conduct thats making it impossible for PR and marketing experts to do their jobs.” This came in the wake of scandals involving broker compensation and the aforementioned disputes over Katrina claims.

My correspondent's lament clearly echoes my point. There is only so much public relations people can do to alter a deservedly poor reputation–as President George W. Bush is painfully learning when it comes to the war in Iraq. Actions definitely do speak louder than words, no matter how effectively one wags the dog.

Special Reports /

Your Own Worst Enemy, Continued

Related Stories

Recommended For You