Posted On: March 28, 2006, 12:41 pm CST

Posted By: Mke from Boston

Ms. LB -

Again, I'm sorry for what you're going through, and you have my condolences. I have been to New Orleans, about 10 days ago, and there is still a lot to be done. There is no doubt your circumstances are difficult.

However, I do have an issue with your blaming the insurance industry for what appear to be your own decisions. You may have gotten bad advice from your agent, but I find it hard to believe an insurance company would automatically drop a coverage (aren't insurance companies out there to INCREASE premiums, thereby make more money?), but don't you bear some responsibility for your own actions? I have flood coverage on my homeowners' policy even though it isn't required, because I think the peace of mind provided are worth the money. I also have mugh higher than statutory limits on my auto coverage, again which costs me more in premiums, but gives me greater protection.

To me, you sound like someone who decided to save a couple bucks by reducing your insurance coverage, and are now upset that you don't have the coverage you gave up. You could have purchased all sorts of coverage that would have protected you now - the insurance companies would have been happy to sell it to you, but you chose not to in order to save money. Ok, that's your choice. However, after making that choice, please don't rant that you're just "asking for what we paid for." GUess what? It sounds to me like you're asking for something that you COULD have paid for, but chose not to. I'd like a new car, but unless I pay for it, I don't think I should be entitield to it. Call me crazy, but why should insurance be any different?

I'm sorry you made that decision, but I have a hard time with you using your own behavior in an attack on an industry which provides financial security to so many people, and for the most part is made up of hard working, dedicated people trying to do the right thing. If you actually sit down and get the facts, you'll realize the property-casualty insurance industry isn't all that profitable - it's return on equity is actually pretty poor, about 6%, compared to an average for the S&P of around 15% (http://www.bizstats.com/corpgp2001.htm). Individuals may be making a lot of money (as in any industry), but the industry as a whole does not. Check out dentists, doctors and lawyers for some very profitable industry segments.

As far as the COBRA/medical issue you have, did you ever ask why it is so expensive? Coudl it have something to do with the cost of medical care, as opposed to insurers making obscene profits?

Also, "act of God" is a legal term of art used in the industry to define a class of risks, risks that either defy statistical prediction or are so expansive in their impact that they cannot be priced (and so are excluded). It is not a comment on religion, other than in its origins.

Regarding reisurance, yes, primary insurers get reinsurance, but they have to pay for it, and they usually only reinsure PART of the risk exposure. And they can only reinsure the exposures that they have resulting from people paying premium. At least one, and potentially several more reinsurance companies were wiped out by Katrina. In addition, the P&C reinsurance industry as a whole will post yet another year of net losses. To make this up, they will have to raise rates, since they have paid out more in claims than they recieved in premiums for several years. That doesn't sound like they're making a whole ton of money to me.

Insurance is not some magic moneymaker scheme - it defers and aggregates risk, it doesn't eliminate it. If there isn't premium to support paying claims, then those claims can't get paid. And if the claims are expensive, the premiums will be expensive too. You can't get around finance and math - 1+1=2, even if you want it to equal 3.

Again, I'm sorry for your circumstance, but I feel there are times when individuals need to accept their responsibility for their choices, and not look for scapegoats and deep pockets to rescue them from their own bad decisions. In my view, Scruggs is relying on having people like you in the jury, so he can make a bundle of cash by usuing their (and your) unwillingness to ask individuals to accept responsibility for their choices.

If you learn more about how insurance companies work, and the financial reality in which they operate, you might have a better idea of why things are happening they way they are happening in your neck of the woods. But I suppose it's easier to just call them evil and blame them for your situation than to try to understand.