CBS Attacks Insurance Companies for Making Money
Companies stayed afloat despite hurricane damages due to reinsurance, a practice the network’s reporter criticized.

By Ken Shepherd
Business & Media Institute
April 6, 2006

     Continuing the media assault on profitable businesses, CBS News attacked the insurance industry for “record profits” in 2005, a year also beset by heavy hurricane damage claims.

     “Even while insurance companies paid out a record amount in claims after Hurricane Katrina and other storms, the industry still made more than $44 billion in profit, an almost 19-percent increase from the year before,” said CBS’s Sandra Hughes on the April 5 “Evening News,” introducing a critic of the insurance industry.

     “They’ve used a national disasters like 9/11, natural disasters like Katrina and phony excuses like too many lawsuits to jack up people’s premiums,” said Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights (FTCR).

     FTCR’s leanings are decidedly liberal. FTCR’s list of proud accomplishments includes working against Republican California Gov. Arnold Schwarzenegger’s 2005 ballot initiative on public pension reform and publishing a study accusing oil companies of slowing down oil refineries to inflate gasoline prices artificially.

     Springboarding from Rosenfield’s complaint, Hughes charged that “insurance companies protected their profits by purchasing their own insurance policies. It’s called reinsuring, and the policies come mostly from Europe.”

     But in order to stay in business – which means insuring customers who need it – companies must reinsure themselves. According to the Insurance Information Institute, “an insurance company’s willingness to offer disaster coverage is often determined by the availability of reinsurance.” The Institute also reported in December 2005 that about half of the estimated $34.4 billion in Hurricane Katrina damages would be paid by reinsurance policies held by insurance companies.

     At least one reinsurance company, Lloyd’s of London, saw a pretax loss in 2005. Although the Associated Press reports Lloyd’s suffered a $181 million pretax loss for 2005, company chairman Lord Peter Levene was quoted characterizing the downturn as “just a small loss” that “represents an excellent performance by the market.” Levene also added that 2005 saw more payouts in insurance claims than September 11.

     Without reinsurance firms like Lloyd’s, American insurance companies might have faced losses in 2005 or withdrawn altogether from offering policies in the Gulf Coast. CBS didn’t address that possibility, which would be unfortunate for the companies and consumers alike.

     The Business & Media Institute has previously documented the media’s treatment of the insurance industry.