Insurance Transparency Project

I-Fans,

I was tempted to put up an ironic headline to accompany this Anita Lee/Sun Herald story. It would go something like this:

“Another 11 People Fail to Understand Insurance”

The story says U.S. District Judge L.T. Senter, in the Southern District of Mississippi, ruled from the bench that State Farm improperly placed on two Biloxi policyholders the burden of proving that wind not water destroyed their house and, on his own, awarded the family the policy limits of $224,000. A jury then awarded punitive damages, finding that the company’s decision was not a simple mistake.

Listen, anyone thinking that the ITP War Eagle is up here on Joralemon Street jumping around clicking his, uh, talons over this verdict is quite mistaken. I never liked the fact that water and wind perils were separated in the first place, leading to ludicrous arguments over what caused a slab to be a slab. Who benefits from that stupid fight?

When ITP gets a bit more sophisticated, I will post a two-hour video taken by a brave/foolish policyholder in nearby Slidell, La., that shows Katrina hitting, causing crazy wind damage and crazy water damage. Trying to separate them is like, as I’ve said, trying to take the matzoh out of the ball. Or at least the meat mixture out of the kreplakch, which, as you know, is difficult to do, and what’s the point?

ITP is further certain that the backlash will begin soon enough — in fact has already
started on the Sun Herald’s comment forum.

“If I was an insurance company I would get out of Mississippi as fast as I could. This is going to be bad for everyone in the long run.”

As a pre-shabbes, pre-Sunday thought, I’m going to step back and observe that logically, ITP can see only two alternative reasons, from an insurers’ point of view, why a customer would ever sue his or her carrier: venality or ignorance. Either you are trying to get something for nothing, which is a crime, or you don’t understand your policy.

I suppose there can be good-faith disagreements, too. And there are. But remember, and I think Person Familiar with the Situation will agree, policies are written to favor the policyholder. Lawyers, please check me here, but these are “contracts of adhesion,” the take-it-or-leave-it kind, and insurers, who wrote the policies, generally speaking are supposed to bend over backwards to pay unless there’s a reason not to. So to deny most or all of a claim (as State Farm did in this case, initially) is not something insurers do lightly. They must believe the policyholder really doesn’t get it. By the way, that means Trent Lott,  Congressman Taylor, a federal judge and many other people in court for the first time in the lives also don’t get it.

There appear to be lot of customers on the Gulf who apparently don’t understand insurance. And now we can add 9 more. The eight jurors and Judge Senter, plus the policyholders, Norman and Genevieve Broussard. Earlier this week, I wrote that I detected both hopeful and not-so-hopeful sentiments at the Insurance Information Institute Property/Casualty Forum at the Waldorf. The hopeful stuff was AIA President Marc Racicot(1) and his call for shared responsibility, and, especially, Paula Rasput Reynold(2) and her call for the industry rethink the way it talks to customers. But I did hear a surprising amount of talk, as I said, about the need to “educate” policyholders, their foolhardy insistence on living near water, their tendency to fall sway to demagoguing politicians, their wanting to have things both ways, etc.

ITP probably agrees with some of that even, but it does observe that this is an industry that seems to be at odds with a large number of its customers.

Private note to War Eagle: Was that pompous?

War Eagle to Dean:  Seek help, stat.
(1)Former Montana governor and RNC chairman, now head of American Insurance Association, the leading industry lobby.

(2) President and CEO of Safeco Corp., Seattle (ticker: SAF).