Scamming Policyholders & Taxpayers
Yeah, buddy. You got that right. Who better to state the obvious then one of the largest captains of industry, even though—or perhaps because— he “was ousted as chairman of the world's largest insurer AIG...” The allegation? Enronizing the insurance company’s books. Remember Ken Lay, who was convicted of corporate fraud? Kenny Boy and Greenberg were part of George W. Bush’s elite $100,000 Pioneer fundraising club.
Just as Kenny Boy scammed Enron’s investors and employees, so too have the Greenberg CEOs of the insurance industry scammed Katrina’s policyholders and the American taxpayers.
Through denying payment on claims, the insurance companies ripped off policyholders. By creating the false lens through which to analyze the claims—the infamous ‘flood vs wind’ dichotomy, insurance companies scammed American taxpayers. This is all so brilliantly and seamlessly interwoven that upon first look, I thought I understood what it all meant. But as I delved into it, the more I came to understand the insurance industry’s devious financial behavior was. . .
What was that adjective Democratic Gulf Coast Congressman Gene Taylor used on his front yard sign? Ah, yes. Evil.
The Watergate scandal gave us the saying “follow the money.” Shall we?
Following the Money
The Insurance Industry Institute reported that the private insurance industry boasted $44.2 billion in after-tax profits in 2005 and $63.7 billion in after-tax profits in 2006. That’s some heavy profit making. These profits were after the companies had paid out $40.6 billion in Katrina claims. Of course, that wasn’t all of the Katrina-related claims.
The federal government’s National Flood Insurance Program paid out $23 billion in Katrina claims. Yes, the government of the United States is in the flood insurance business.
The National Government’s Flood Insurance Program
Congress established the Federal Flood Insurance Program in 1968. Think about this a minute. Why would our federal government provide flood insurance when we have an entire industry dedicated to making profits off of providing insurance? The answer is not, because the insurance companies were aggressively writing policies and happily paying out claims for its customers. The Government Accounting Office (GAO) wrote “[b]ecause of the catastrophic and unpredictable nature of floods, private insurance companies do not typically cover flood losses. Congress established the NFIP in 1968 to provide an insurance alternative to disaster assistance in response to the escalating costs of repairing flood damage.”
In 1983, the federal government turned over to the private insurance industry the selling, servicing, and adjusting of those NFIP flood claims. Citing the flood program, the GAO wrote “90 percent of all natural disasters in the United States involve flooding.”
Sweet! For the private insurance companies, that is. Can you imagine such a racket where a private company can so easily hand its own bills to the federal government? This is sounding more and more like Cheney’s Halliburton with those multi-billion dollar no-bid contracts in Bush’s war of choice in Iraq!
But, for this to be an industry wide practice there would have to be collusion and that is illegal, right? Well, unless an industry is exempt from the national anti-trust laws, yes, this would be collusion. Guess whether the insurance industry is exempt. Other than sports leagues, insurance companies are the only other corporate sector that is exempt from the nation’s anti-trust laws which prohibit price fixing and other unfair business practices.
Fortunately, the Senate’s Democratic Leaders have put together legislation to strip the insurance companies of its 62-year old exemption, and U.S. Senators Mary Landrieu (D-LA) and Trent Lott (R-MS) are among its co-sponsors. The goal is to make it so that the insurance companies cannot engage in price fixing.
For example, at present, these companies can call each other up and say, “Hey, I’m blaming damage on water and eliminating the cost to my company and make the policy holders go to the government for money. You do the same.” This proposed law will finally make price-fixing behavior in the insurance industry illegal.
Let’s drowned out the insurance industry’s opposition by calling and emailing our two U.S. Senators to express our support for this legislation to bring the insurance industry into line with the law that covers every other business that crosses state lines. As usual, A.M. in the Morning! provides email letters and access to the email addresses as well as phone scripts and access to telephone numbers of your U.S. Senators. As we make our two calls or send off our two emails, we can rest easy knowing that we’re knocking the wind out of the insurance industry’s sails.
After Katrina, Greenberg CEOs of the insurance industry proved that American policy holders are NOT in good hands and our insurance companies are lousy neighbors.
Tomorrow: Wind? Water? More like a bunch of hot air!
