The National Flood Insurance Program (NFIP) administered by the Federal Emergency Management Agency (FEMA) is a mess. The program’s fiscal house is far from being in order, and now a PBS/NPR documentary reveals the ineptitude of the government management of the program. In the process, the insurance industry gets attacked and left with a black eye, partly because it didn’t fight back against the inherent bias in the reporting. According to the report, no insurers agreed to be interviewed for the documentary – that looks great.
In the meantime, the reporter grills interviewees about “how much profit are the insurance companies making on this program?” To be clear, the claims are paid by the government, and the insurers are receiving fees from the premiums collected to cover the services they provide in administration of the policies. Yet, the report makes a convoluted argument that insurers are delaying or settling claims for low-ball amounts because of concern that Congress will kill the program if costs are not kept down. Totally illogical given that the insurers are not paying the claims with “their money” and if there is a true concern about “killing the golden goose” then why would the same insurers be charging excessive fees for their administration services? Still, no insurers step up to defend themselves. Personally, my response to the self-righteous reporter’s question about “how much profit?” – “Not enough for having to deal with the federal government bureaucracy, sweetheart.”
Okay, so I’m no public relations genius. Nevertheless, it’s irritating when the media launches these investigative hatchet jobs on predictable targets and perennial “bad guys” such as the insurance industry. Where are the reports vilifying the manufacturers of hammers and toilet seats after the exorbitant Pentagon spending on such commodities made news years ago? Worse yet, why won’t the insurance industry fight back? The allegations of “excessive profit-taking” (an oxymoron to a free-market capitalist libertarian such as myself) are left out there, hanging in the air, polluting the image of the industry at the same time we are trying to convince young people to consider a career in the industry. You want to see a really ugly mess? Let the federal government manage the entire program – from policy issuance to claim settlement. [Insert your favorite postal service joke here.]
Insurance is a noble industry and profession. We help put people’s lives back together (when the government stays out of the way), and we grease the cogs of economic activity. It’s time for the insurance industry to stand up for itself more forcefully.