In New York Times Insurance Coverage, Economic Illiteracy

Plus, Justice Thomas’s marriage; another Harvard antisemitism lawsuit, and more

Today’s print New York Times carries a front-page, above-the-fold news article under the headline “Homeowners Feel Pinch as Insurers’ Losses Rise.” The article jumps to two full pages inside, and, in a display of editorial indulgence, even does a “double jump” to a third inside page. The gist of the story is that climate change is causing losses to home insurers, which they are passing on to customers in the form of higher premiums.

The article includes a chart labeled “profitability of homeowners insurance” with red bars labeled “loss” with data from A.M. Best ostensibly showing that insurers paid out more than they received in revenues. “In 2023, insurers lost money on homeowners coverage on 18 states, more than a third of the country,’ the Times says. “Nationally, over the past decade, insurers paid out more in claims than they received in premiums, according to the ratings firm Moody’s, and those losses are increasing.”

Absent from the article, by Christopher Flavelle and Mira Rojanasakul, is any real understanding of how insurance works. In particular, insurance works by spreading risk, and insurance companies make money by investing the premiums over time—the “float.”

The Times is talking about underwriting losses, but it doesn’t mention investment gains. Here is a chart showing the performance of the iShares U.S. insurance ETF and the Dow Jones U.S. Select Insurance Index.

The ETF, whose holdings include companies such as Progressive, Chubb, AIG, Travelers, Metlife, Allstate, and Aflac, is up 28.51 percent for the year ended April 30, 2024, and an annualized 11.32 percent for the ten years ended April 30, 2024. That is not shabby.

The claim that that insurers lost money in 18 states but made money in the other states is the insurance companies trying to justify, to the state insurance commissioners, rate increases in the money-losing states. The insurance companies pay A.M. Best and Moody’s (which the Times doesn’t explain.) The way insurance works is that the insurers lose money on some customers and in some places, make money on other customers and in other places, and, if they roughly breakeven or make a little money on underwriting, they can make seriously good money by investing the float. Warren Buffett has explained this about Geico in dozens of Berkshire Hathaway shareholder letters.

Anyway, it may indeed be that one reason homeowners insurance premiums are going up is, as the Times claims, “global warming.” But also a factor—downplayed in the Times article—is the inflation that has increased costs of building materials and repair. In its haste to chase one story that its left-leaning readers will want to read—“climate change renders homeowners insurance unaffordable” — the Times misses a potentially better story that its left-leaning readers would also like—“insurance companies try to justify rate hikes by making it look like they are losing money, even when they are doing pretty well.” That is a story the Times is participating in with today’s article. Meanwhile, the paper also overlooks the story that would resonate with a center-right audience—“Bidenflation renders homeowners insurance more expensive.” And it also overlooks stories that may not fit so easily into any political pigeonhole, but that also affect the situation, such as regulatory barriers to new entrants in the insurance business, and whether bid-rigging of the sort that Eliot Spitzer identified in his investigation of insurance brokers persists.

There was an era when anything taking up two-plus pages of print acreage and starting above the fold on page one would require signoff from a Times masthead that was skeptical, but that era appears to be over. It’s a disappointment, but it offers opportunities for publications such as this one to ask of the Times, “where were the editors?”

Justice Thomas’s marriage: A member of the New York Times editorial board, Jesse Wegman, has an article in the Times wanting Justice Thomas to recuse himself from certain Supreme Court cases on the basis of his wife’s supposed actions. “Justice Thomas’s extreme closeness with his wife (he has described them as being melded “into one being”) raises similar doubts about his ability to be impartial,” Wegman writes. 

This is pretty funny. At what point does mere “closeness” with a spouse cross the boundary into “extreme closeness” of the sort that doesn’t pass muster with the Times editorial writers? How would the Times propose that this be policed? Is the same standard going to be applied to spouses of Times reporters and editors, allowing them to cover issues in which their spouse is involved, so long as they don’t transgress the “extreme closeness” threshold? 

I’m open to reason on recusal standards for Supreme Court justices, but any standard that involves drawing a distinction between ordinarily close spouses and extremely close spouses seems, as a practical matter, a difficult one to enforce.

Another antisemitism lawsuit against Harvard: Harvard already faces at least two federal lawsuits stemming from its mishandling of and fueling of an outbreak of antisemitism on its campus—Kestenbaum v. President and Fellows of Harvard College, brought by Harvard Divinity School student Alexander “Shabbos” Kestenbaum and his lawyers at Kasowitz, Benson, and Bauer v. President and Fellows of Harvard College, brought by Alan Bauer and other Harvard graduates. Today brings news of a third lawsuit, by the Louis D. Brandeis Center for Human Rights Under Law and Jewish Americans for Fairness and Education. “Harvard has been deliberately indifferent to the pervasive antisemitism on campus, creating an unbearable educational environment. Plaintiffs and other Jewish and Israeli students feel isolated, unwelcome, and unable to enjoy the educational rights and benefits to which they are legally entitled,” the complaint says. It cites a Harvard Kennedy School class in which “classmates taunted” the Jewish students “by organizing a class picture, in which they and teaching fellows wore ‘keffiyehs’ as a symbol of Palestinian support and opposition to the HKS Members’ identities. The professor appeared in the picture as well. Administrators then circulated that photo to other HKS students.”

A photo of a class picture at the Kennedy School with students wearing keffiyehs, submitted as part of a new lawsuit against Harvard.

Harvard’s diploma dilemma: On the eve of tomorrow’s Commencement, Harvard is in a quandary over whether to allow 15 anti-Israel activists to graduate. At the official Harvard Class Day ceremony today, they were praised by peers from the podium as “students of integrity,” their names were read aloud, and student marshals announced from the podium, “the class of 2024 is incomplete without these 15 seniors.” The Harvard College Administrative Board doesn’t want to let them graduate; the Faculty of Arts and Sciences voted to let them graduate; and now it’s up to the Harvard Corporation to decide. There’s some short-term advantage probably in getting the anti-Israel activists out of the system, but it’s outweighed by the message of impunity conveyed to future would-be disrupters. Absent from the disciplinary discussion is another, perhaps more significant question: whether Harvard has sufficiently educated the students to shuffle them onward.

It made me think of remarks by a dean of Harvard’s Faculty of Arts and Sciences, Jeremy Knowles, in September 2006, that have been frequently remembered and quoted since then by other Harvard presidents and deans: 

In 1914, when I was a good deal younger than I am now, there was a philosopher at Oxford called J. A. Smith. He used to start his first lecture by saying: “You are now about to embark upon a course of studies which will occupy you for [four] years. Together, they form a noble adventure. But I’d like to remind you of an important point . . . Nothing that you will learn in the course of your studies will be of the slightest possible use to you in [later] life - save only this - that if you work hard and intelligently, you should be able to detect when a man is talking rot. And that, in my view, is the main, if not the sole, purpose of education.”

"Professor Smith believed that the most important benefit of a college education was skepticism, and that - whatever we go on to do in life - the biggest danger is that of being taken in, either by knaves who have ulterior motives, or by fools who haven’t asked any of the right questions. All of you have emerged victorious from twelve, long, years of coursework and examinations, and you’ve arrived here bursting with all there is to know about everything from the sex habits of the mollusk, the socio-economic basis of the Russian revolution, and the religious imagery of Milton. [I can’t resist reminding you of an exasperated Harvard President who was asked why the University was such a marvelous repository of human knowledge. “Well you see,” he said, “the freshmen bring so much when they arrive, and the seniors take so little away when they graduate.”] But here you are, wonderfully informed, and hungry for more. So why am I worried about your skill at detecting people who talk rot?

"There are many kinds of rot, of course. Plenty of it occurs on the edges of the sciences. We’ve all heard about those people who bend spoons just by thinking hard about them, or how if you play Mozart to carrots, they grow faster. This kind of rot is not a problem for Harvard undergraduates. You all know exactly how to design and conduct a controlled experiment, so that you separate groups of carrots, for example, would experience Mozart, silence, and perhaps a tape of hungry carrot-eaters, and we should see which grew best.

"Nor am I going to worry about charming fantasy, such as Santa Claus or the Tooth Fairy. I’m not going to suggest that these whimsical inventions are rot, and in any case, most of us let go of them by the time we reach college. Indeed, if any of you have been admitted to Harvard still believing in the Tooth Fairy, I’m certainly not going to do anything about it now. Then there’s the kind of rot that’s relatively harmless pseudo-science, like that which fills the astrology columns of some newspapers, or that goes on when someone reads your palm. Most often, they predict that we are about to find great happiness, immense wealth, and the mate of our dreams, and I’m not particularly against any of those.

"No. The rot that Professor Smith wanted us to discern, is the kind that occurs in our daily lives, and that determines what we think and how we act. I’ll call it logical rot. When a respectable newspaper tells you that America’s children are undernourished because - can you believe it - exactly half of the nation’s children are below average height. That’s rot. When we’re told about the existence (or non-existence) of global warming, or about a new ‘miracle’ cure for AIDS, that’s when we’d better be skeptical and analytical. These are the kinds of things that affect our understanding of the world, and that affect the decisions that shape our lives. These are the things that we must think about. Bertrand Russell once said: “Most people would die rather than think, and many of them do.”

The free speech types want Harvard’s disciplinary standards to be content-neutral, that is, to focus on disruptive behavior or harassment rather than the content of speech. For sure there’s logic to that. But if I were a Corporation member weighing this decision surely one factor would be this “skeptical and analytical” test, this “detecting people who talk rot” test. If you’re going to falsely accuse Israel of “apartheid” and “genocide” and “settler colonialism” and call for divesting in weapons manufacturers who are helping Israel defend itself from an Iran-backed terrorist group, you haven’t passed the “detect when a man is talking rot” test. How much of that is Harvard’s fault and how much is the students’ fault is an open question, but regardless of whose fault it is, it’s a failure.

Thank you: At The Editors, we try to detect people who talk rot. If you appreciate that, please consider supporting our independent journalism by becoming a paying subscriber.

And if you already are one, please help us grow by forwarding this newsletter to those who might enjoy it, along with a suggestion that they sign up.