The Audit explains: Hartwig believes the appropriate measure is compounded annual growth. Bloomberg took the percentage increase from one year to the next and averaged them all. This emphasizes the large jumps industry profits took from one year to the next.

Bloomberg’s method is unusual, but allowable. It’s certainly not a factual error.


Alleged error: Hartwig says Bloomberg “incorrectly insinuates that states have no prosecutorial power” over insurers.

The Audit explains: What Bloomberg said was that state insurance departments have no prosecutorial powers and that prior to Katrina no state or federal prosecutor had started a criminal investigation of insurer claims handling. The first statement is categorically true, and Hartwig’s letter offers no refutation of the second.

Alleged error: Bloomberg says insurers spent $98 million on lobbying. Hartwig says that figure is an exaggeration because it includes life and health insurers when the story dealt with property/casualty insurers.

The Audit explains: I think this one speaks for itself. Bloomberg never said otherwise. It’s not an error.

Alleged error: Bloomberg said the federal flood program “helped the industry increase profits by 25 percent in 2005, the year of Katrina.” Hartwig says the finances of private insurers are “entirely independent” of the flood program and that what the flood program did or didn’t do could not have an impact on insurers’ profits.

The Audit explains: While Hartwig is right that the industry’s and the government’s books are separate, private insurers are actually intimately involved in the flood program. Private insurers adjust federal flood claims for the government and were charged with the task of assigning the cause of Katrina damage to either wind (meaning insurers paid) or flood (meaning the government paid). Litigation and congressional testimony supports Bloomberg’s assertion that insurers on at least some occasions attributed losses caused by wind to flood damage, and thus avoided payment at the government’s expense.

Bloomberg’s phrasing was clumsy, however, in that it could lead to the conclusion that the flood program helped boost insurer profits by 25 percent when the sentence merely meant that profits grew 25 percent and the flood program helped. It is beyond question that this is true.

Audit’s bottom line: Bloomberg could have saved itself some headaches by using figures that were less tendentious: if it said insurers paid out 65 percent, instead of 55 percent, is that something insurers should be proud of? Should Bloomberg have said profits increased “six fold,” rather than an average of 46 percent a year in a given period?

It could have but didn’t have to.

Another point: facts are important, but arguments over the number of angels dancing on the head of a pin can serve as an unhelpful distraction from the need to address what are obviously real problems.

Bloomberg’s story had a point of view: that the insurance claims system is broken to the point that underpayment is now routine, indeed systemic. It used facts to support its point.

To me, that’s a strength. But, of course, that’s just my opinion.

Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014).

Follow Dean on Twitter: @deanstarkman.