But where I saw strength, critics saw weakness. They believed the story lacked balance and unfairly used anecdotes, even if true, to tar an entire industry.
Sam Friedman, a Deadline Club member and editor-in-chief of National Underwriter, a trade publication, in an online column called the series a “hatchet job” and asked readers to write to the Deadline Club to deny Bloomberg a prize.
In one of his posts, Friedman said he anticipated being dismissed as an “industry shill” but that he found the piece so one-sided and misleading that even its nomination was a travesty.
In an email to me, Friedman says that if he influenced the club, “so be it.”
This particular article, “The Insurance Hoax,” was a hatchet job, plain and simple. Not only did it have numerous factual errors, but the publication did not grant industry representatives a fair opportunity to refute the central assertions in the article, nor did they publish any corrections or even a letter offering the other side, to my knowledge.In addition, the article painted the entire industry with a single brush, which I feel is unfair, considering that the overwhelming majority of Katrina claims were, in fact, paid, and that the industry laid out tens of billions to rebuild these flood-prone areas—often when the cause, wind or flood, was not clear.
He also takes issue with my findings that Bloomberg did not make factual errors:
Wow, so as long as something is “factual,” it is “accurate” in your view, even if taken totally out of context? Two plus two does equal four, but if there are six elements, and one arbitrarily decides to ignore the other two, the story is fine??? Very odd logic, sir.
The fight shifted venues earlier this year when the Deadline Club named “Hoax” as a finalist in four categories, sparking objections from Friedman, Hartwig, and others who pointed to what they saw as the series’s flaws and called on the club to reconsider. The club then wrote Bloomberg.
According to Winkler’s letter, Paradis on May 5 emailed a four-page memo to Bloomberg with nine “allegations of inaccuracy” and said the club’s research “highlighted parts of the article with incorrect, inexplicable or questionable material.” The issue at this point was whether the stories should be disqualified from the contest altogether.
On May 9, Paradis and other club officials reviewed the stories in a conference call with Bloomberg editors.
In the end, the club took a middle path: it denied the series an award but left it as a finalist. Paradis declined to discussion how the club made its awards judgments but emphasized that the series was not removed as a finalist.
Still, someone has to settle this “error” question. So, ladies and gentlemen, if I could ask you to kindly step behind CJR’s specially reinforced, lead-lined blast barrier: The Audit is going in.
In his August 2007 letter to Bloomberg Markets’ Henkoff, Hartwig lays out several alleged errors, including one that is indeed a flat mistake: Bloomberg said the storm killed “more than 16,000” people when the figure was closer to 1,600.
Bloomberg agreed and corrected it in the text (though it doesn’t note the correction online).
The rest are actually disagreements, and I’ll handle the closest calls:
Alleged error: Bloomberg said insurers paid out only 55 percent of premiums to policyholders in 2006; Hartwig says the correct number is 65 percent.
The Audit explains: Bloomberg is relying on a figure known as the “loss ratio,” which is the amount actually paid to policyholders excluding various expenses directly associated with the claim, including legal fees, the cost of adjusting and investigating the claim, etc.
Hartwig says it is irresponsible and misleading to exclude these expenses, which also benefit policyholders. I say that Bloomberg language was precise: it was characterizing the amount paid to policyholders. It has a more than reasonable basis for its position (and is not alone in making it), and did not make an error.
Alleged error: Bloomberg said insurer profits since 1994 increased by “an annual average of 46 percent.” Hartwig says the correct figure is 15.9 percent.
I'm surprised you gave Bloomberg a pass on averaging multi-year growth rates, rather than compounding them, calling it unusual but allowable. Averages have their place, but they should never be allowed in interpreting a sequential time series, as happened here. If a company tried to talk about average growth over the years the way Bloomberg did, I'd hope the SEC would fine them for misleading investors. That's the type of misuse of statistics that Mark Twain complained about.
Posted by KLH
on Wed 9 Jul 2008 at 02:55 PM
I am disappointed to see that the point-by-point rebuttal by Mr. Hartwig and my own critique failed to convince Mr. Starkman about the article's shortcomings. We'll just have to agree to disagree.
Frankly, I just chalk this up to more of the same--the fact that the bulk of those in the media covering insurance (as well as those assessing the performance of reporters doing insurance stories), just don't understand how the business works, let alone appreciate how much it means to society and the economy.
Mr. Starkman raises the issue himself in his post.
He says that insurance is a "backwater in the mainstream business press," which is absolutely right, although I would dispute his conclusion that because of this, "its actors are thus unused to serious, arms-length scrutiny."
In fact, all the industry ever gets is negative press. Part of the problem is poor public relations by the industry. (Perhaps the Insurance Information Institute, beyond their useful annual "Fact Book," should offer at least an online introductory seminar for journalists covering the industry.)
But it's also the old "man bites dog" problem--no one thinks an insurance story is news if billions in claims are paid and lives, homes and businesses are rebuilt; they only send reporters when there is a dispute of some sort.
The result is that insurance news--good and bad--is under-reported or blatantly misreported. And when reporters are assigned stories, too many don't know what they are talking about, or falsely assume that all insurers, as well as their adjusters and agents, are crooked.
As for the Bloomberg letter of complaint to the Deadline Club, a couple of points.
"Bloomberg News" Editor In Chief Matthew Winkler characterized me in his letter as "a frequent defender of the insurance industry," as well as someone who "regularly appears as a speaker at industry functions..."
I knew Bloomberg and company would dismiss me as some industry shill. But as my loyal readers know--especially many of those in the industry having felt the sting of my pointed barbs--that's a bunch of hooey!
Indeed, any regular reader of my blog or NU column would probably be more likely to characterize me as "a frequent critic of the industry."
To refresh your memory, just check out my harangues against the mega-brokers after the contingency fee abuse and bid-rigging scandal, the book-cooking by AIG using bogus finite reinsurance purchases, and, yes, the industry's often poor handling of Hurricane Katrina claims. And don't get me started about the horrors of the health insurance industry.
In addition, Bloomberg might be unaware that a substantial part of the "National Underwriter" readership (15,000 subscribers) are in fact consumers--corporate insurance buyers including risk managers, CFOs and others who assess exposures and, in some cases, purchase insurance to cover them.
If this consumer audience ever believed that me or my magazine were shameless apologists for the insurance industry, they would send us packing.
Instead, we've grown tremendously among the buyer crowd in terms of name recognition, respect and influence.
As for the fact that I "regularly appear as a speaker at industry functions," I am guilty as charged.
But, frankly, who else would have me speak? As a business journalist covering the insurance industry full time, I cannot imagine a paint manufacturing conference asking me to talk about trends in their field.
Is Bloomberg suggesting I am bought and paid for by speaking fees?
Perhaps, but the fact is I have never been paid to speak to any group I've addressed. (I was offered a paid gig recently, but turned it down.)
I do speaking engagements to raise NU's profile and build on my reputation as an opinion leader, not to pad my bank account or solicit kickbacks from the industry I cover.
However, Bloomberg's letter did make one point that gave me pause: "Friedman never took the basic journalistic step of asking Bloomberg to comment on the 'Insurance Hoax' before he condemned it as a 'hatchet job' in his online column."
If I was working on a news story, I would absolutely agree--that's not fair. But in an opinion piece in an online blog, the journalistic ethic is murkier.
Still, it could not have hurt to seek out Bloomberg's opinion at the time. I was just so taken aback by the overwhelmingly one-sided attitude permeating the piece, as well as the way they presented their statistical "facts" and failed to distinguish the nuances within this vast industry, that I rendered my verdict based on the article as it stood--as any of their readers would.
Of course, Bloomberg's people and anyone else are welcome to respond to anything I say, right on my blog at www.property-casualty.com. That's what the comment section at is for.
Bottom line, I'm sorry Mr. Starkman didn't see the Bloomberg piece my way.
In my expert opinion, the Bloomberg article simply did not capture the "truth" behind this story.
A few bad actors does not an industry make, whether the field is insurance or journalism.
Posted by Sam Friedman
on Thu 17 Jul 2008 at 12:51 PM