Talk about piling on! Right after the cover story in “Bloomberg Markets” (headlined “Insurance Hoax”) that I cited this week, “The New York Times” followed up on Labor Day with another devastating front page article, “Insurers Bear Brunt Of Anger in New Orleans.” Read it and weep.

(To read the complete story, click here.)

While at least the Times acknowledges that insurers “may have” (do they doubt the figure?) paid out $11 billion to Louisiana residents for Hurricane Katrina damages, they go on to report that “they have also become a new villain in the tales people tell about the slow recovery here.”

“Every neighborhood is full of horror stories about companies that reneged on their promises, offered only pennies on the dollar in settlements, dribbled out payments, deliberately underestimated the costs of repairs, dropped longtime customers and sharply increased the price of coverage,” the Times reported–quickly adding, “it is not just talk.”

While conceding that “traditionally, relatively few customers sue their insurance companies,” the article noted there are about 6,600 insurance-related lawsuits in Federal District Court in New Orleans–3,700 of them still pending.

The Times also cited “thousands of formal complaints” filed with the Louisiana Department of Insurance–”4,700 of them in 2006 alone. That is just a tiny fraction of the number of people who feel aggrieved, regulators say: for half a year after the storm, calls to the department reached 20,000 a month.” Yikes!

Indeed, the Times reports, “the usually eye-glazing topic of homeowners insurance is so incendiary now that State Senator Walter J. Boasso, a Republican turned Democratic candidate for governor, has proposed jailing insurance executives found to have acted in bad faith.” (That would be quite a change from the norm, since in the past it has often been the Louisiana insurance commissioner who found himself in jail at some point!)

While insurers keep repeating the mantra that 99 percent of homeowners claims have been settled, the Times reports that “in New Orleans, many people say that just because they stopped fighting their insurers does not mean they are satisfied.” One claimant was quoted as saying: Youre so worn down by everything youve been through that you just dont have the fight left in you.

Bob Hartwig, president of the Insurance Information Institute, got his usual two cents in about the industry's solid performance and good intentions–but unfortunately two cents doesn't buy the industry much good will in the face of such intense dissatisfaction.

At least this time the reporters cited a second source in the industry's defense, quoting Joe Annotti of the Property Casualty Insurers Association of America. However, the article is so overwhelmingly negative that neither spokesmen can help but come across as apologists for an industry that turned its back on many of its most vulnerable policyholders.

What got my goat was reading that “insurance companies, which traditionally have made much of their profits by investing premiums until the money was needed to pay claims, are now paying back to policyholders less of the premium money they collect.”

Could you imagine that? Insurance companies actually writing insurance for a profit! What a concept, especially for a business that traditionally posts a return on equity below most other industries.

In any case, it's more fuel for the fire for those eager to burn the industry at the stake.

Read the article for yourself and let me know what you think.

Special Reports /

Round Two: Insurers Hammered Again!

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