Despite year of catastrophic losses from hurricanes, insurance companies still made record profits

Published on

CBS TV National Evening News

RUSS MITCHELL, anchor: Well, no matter where you live, if you have a car or a home, you have no choice. You have to have insurance. So it might surprise you to know that in a year of catastrophic losses with hurricane after hurricane, the companies that insure our property still made record profits. How can that be? Here’s Sandra Hughes.

SANDRA HUGHES reporting: After nearly a month straight of rainy days, Northern California got a break today, but hillsides are soaked and shifting. A mud slide could wipe out the Mailer home, a disaster that wouldn’t be covered by homeowner’s insurance.

Unidentified Man: So I think it’s a total loss. It’s going to be all out-of-pocket.

HUGHES: Ever since Hurricane Andrew hit Florida back in 1992 and took a $25 billion bite out of the insurance industry, companies have been charging more and covering less. Mud slides, floods and earthquakes are routinely exempt from home owner policies. That’s why last year, 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.

(Graphic on Screen)

Storm Damage Insurance 2005 Claims: $57 Billion

Insurance Industry 2005 Profits: $44 Billiom = Up 18.7%

Mr. HARVEY ROSENFIELD (Foundation for Taxpayer and Consumer Rights): 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.

HUGHES: Insurance companies protected their profits by purchasing their own insurance policies. It’s called reinsuring, and the policies come mostly from Europe.

(Graphic on Screen)

Hurricane Katrina: 30 % of damages covered

HUGHES: Only 30 percent of damages from Hurricane Katrina was covered by insurance because, as was the case for Faith Obedience Baptist Church in Biloxi, most of the destruction was caused by floodwaters and was not covered.

Pastor ROBERT BURNS (Faith Obedience Baptist Church): I feel that the insurance companies, you know, should, personally, my view is they should take care of it. But they call it uninsured. We don’t argue that.

HUGHES: And in those coastal regions, insurers say premiums will go up.

Mr. ROBERT HARTWIG (Insurance Information Institute): But part of being able to help communities in the future that might be impacted by similar disasters is to make sure the industry remains financially strong, stable and secure.

HUGHES: What homeowners want to know is who is benefiting from that financial
strength when disasters strike? Sandra Hughes, CBS News, Los Angeles.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases