The Fire Next Time
May 31, 2016 1:54 PM Subscribe
Business of Disaster: Insurance firms profited 400 million after Sandy. An investigative report from Frontline and NPR.
And Part II.
And Part II.
I'm kinda lost as to how they profitted--I mean i see the figures but I don't really understand what money is coming to them when they have to pay out claims. Is this all in fees charged to the government for administering this federal flood aid thing?
posted by Hoopo at 2:54 PM on May 31, 2016 [1 favorite]
posted by Hoopo at 2:54 PM on May 31, 2016 [1 favorite]
I only heard the NPR story, and found it super-confusing. Seemed to say that the insurance firms had an incentive to deny claims to keep the fund from running out, even though it was the government's money and not their money. Does Frontline explain it better?
posted by joeyh at 2:55 PM on May 31, 2016
posted by joeyh at 2:55 PM on May 31, 2016
"This is a fee-for-service operation," said Hartwig, president of the Insurance Information Institute. "The federal government determines what the appropriate payment is."
More accurately: "Our lobbyists, who work for us, determine what the appropriate payment is."
posted by turbid dahlia at 2:57 PM on May 31, 2016 [4 favorites]
More accurately: "Our lobbyists, who work for us, determine what the appropriate payment is."
posted by turbid dahlia at 2:57 PM on May 31, 2016 [4 favorites]
Hoopo, they benefited in at least three ways: an insane markup on services rendered, withholding money from households, and charging the households for lawyers fees.
posted by Yowser at 3:05 PM on May 31, 2016 [2 favorites]
posted by Yowser at 3:05 PM on May 31, 2016 [2 favorites]
If the adjuster wanted to pay the homeowner more, Coolidge would reject the adjuster's assessment until he got the answer his employer wanted, and in some cases he switched adjusters or threatened to do so. "'I'm going to take half your pay and give it to him," he recalls telling several adjusters.I don't think that's what regret is. All I'm seeing is a self-serving shrug and the old chestnut, "just following orders." why actively profiting off the death of entire communities.
Looking back, Coolidge says he regrets that behavior but at the time, he didn't feel he had a choice. "I feel bad every day for participating in that. It is what it is. [The insurance companies] had the upper hand. You either do it or they'll remove you."
posted by MiltonRandKalman at 3:08 PM on May 31, 2016 [6 favorites]
A 30% profit margin is ridiculous, especially off a necessary service like flood insurance.
To answer why private companies should care about the national program going bankrupt, I think it's probably because they don't want to undergo audits. If the program shuts down then millions of people are going to ask why. Congress will open hearings and (for the first time) the companies will have to open their books. Better to keep the program limping along with plausible rejections than have the whole scam blown wide open.
posted by sbutler at 3:23 PM on May 31, 2016 [2 favorites]
To answer why private companies should care about the national program going bankrupt, I think it's probably because they don't want to undergo audits. If the program shuts down then millions of people are going to ask why. Congress will open hearings and (for the first time) the companies will have to open their books. Better to keep the program limping along with plausible rejections than have the whole scam blown wide open.
posted by sbutler at 3:23 PM on May 31, 2016 [2 favorites]
Congress will open hearings and (for the first time) the companies will have to open their books
This is the Congress who held 11 Benghazi hearings and tried to repeal the ACA 70-something times. What makes you think they'll take any action that might redound to the benefit of their constituents?
posted by suelac at 3:27 PM on May 31, 2016 [8 favorites]
This is the Congress who held 11 Benghazi hearings and tried to repeal the ACA 70-something times. What makes you think they'll take any action that might redound to the benefit of their constituents?
posted by suelac at 3:27 PM on May 31, 2016 [8 favorites]
So I gather this is some kind of federal pot of money set aside for floods that for whatever reason the government has decided to step away from and let private for-profit companies administer without oversight?
posted by Hoopo at 3:38 PM on May 31, 2016
posted by Hoopo at 3:38 PM on May 31, 2016
I need a new abbreviation... instead of tl;dr I need something like ti;cnfwntps.
(too infuriating; could not finish without needing to punch someone)
posted by ElDiabloConQueso at 4:28 PM on May 31, 2016 [8 favorites]
(too infuriating; could not finish without needing to punch someone)
posted by ElDiabloConQueso at 4:28 PM on May 31, 2016 [8 favorites]
I have to wonder if this is something they learned to do after the Oakland Fire.
posted by rhizome at 5:15 PM on May 31, 2016
posted by rhizome at 5:15 PM on May 31, 2016
In theory, homeowners shouldn't be shortchanged because the insurance companies are only acting as a middleman between FEMA and the homeowners making claims, essentially contracting with the government to evaluate damage and assess compensation.
So they didn't profit 400 million as a result of denying claims. Shitty, dishonest headline. I expect that from Frontline, but not NPR.
posted by jpe at 6:02 PM on May 31, 2016
So they didn't profit 400 million as a result of denying claims. Shitty, dishonest headline. I expect that from Frontline, but not NPR.
posted by jpe at 6:02 PM on May 31, 2016
I have this podcast in my feed but haven't listened yet. Does it cover how rates will go up-up-up for these poor people in the years ahead?
posted by wenestvedt at 6:51 PM on May 31, 2016
posted by wenestvedt at 6:51 PM on May 31, 2016
ti;cnfwntps
This needs to catch on. I couldn't finish the article either. INFURIATING.
It seems like in these times, insurance is ALWAYS a scam. Why on Earth would I ever file an auto insurance claim, when I know it will cost me at least 2x more than whatever I will get ... ?
Shitty, dishonest headline. I expect that from Frontline, but not NPR. I expect that from Frontline, but not NPR
lol. no prejudice there, eh? "Business Of Disaster: Insurance Firms Profited $400 Million After Sandy" -- what on earth is misleading there? (did they change the hed?)
posted by mrgrimm at 9:26 PM on May 31, 2016
This needs to catch on. I couldn't finish the article either. INFURIATING.
It seems like in these times, insurance is ALWAYS a scam. Why on Earth would I ever file an auto insurance claim, when I know it will cost me at least 2x more than whatever I will get ... ?
Shitty, dishonest headline. I expect that from Frontline, but not NPR. I expect that from Frontline, but not NPR
lol. no prejudice there, eh? "Business Of Disaster: Insurance Firms Profited $400 Million After Sandy" -- what on earth is misleading there? (did they change the hed?)
posted by mrgrimm at 9:26 PM on May 31, 2016
So they didn't profit 400 million as a result of denying claims. Shitty, dishonest headline.
Yeah it's definitely a little oddly put together. I can't watch the video but I did read the linked article. I definitely did not get the impression the insurers charged the homeowners for legal costs. Not sure how they could do that. The fellow in the article incurred legal costs fighting his insurance company, and the insurance company charges their legal costs to FEMA. Might have different info in the video, not sure.
I'm still not sure I totally understand what insurers did here--were the profits we are talking about from administering claims under the FEMA flood assistance program? Like, essentially, are the insurers who sell flood insurance under this program even taking on risk, or is it mitigated by FEMA? That's what would make sense to me -- in Canada insurers don't often write flood insurance because for the people in flood-prone areas who need it most, it's basically a sure thing that the insurer will lose money. "Overland flooding" is excluded from most homeowners policies here by default. Like, the premium would be absurdly high for that to be profitable coverage on their part, and by and large people would not be able to afford it. My guess would be that's why this FEMA flood assistance program exists in the first place. So if the insurers are writing the policies and administering the claims for the FEMA program and the money for that comes in part from FEMA--who I am assuming subsidizes the costs of writing these policies and paying these claims so that flood insurance is something that people can buy--then yes, I would imagine their margins look pretty good. They're not taking on as much of the risk and are charging FEMA for their work in resolving flood claims.
That said the stuff that adjuster guy was talking about, where managers are telling them to remove things that should be covered -- that's a pretty serious issue if that's happening. And the fellow whose foundation was supposedly "long-term damage" according to his insurer...aside form the ethical issue in bullshitting a guy whose home was destroyed, I'm pretty sure even as a business move they should not have gone to court on that. That kind of allegation needs to be substantiated if you go to court. That's probably running up money comparable to what the claimant is asking for just in expert engineering reports and legal fees. You don't do that on a hunch, you pay the damned claim. How did that even happen? I feel like there's a lot we're missing on this.
posted by Hoopo at 9:30 AM on June 1, 2016
Yeah it's definitely a little oddly put together. I can't watch the video but I did read the linked article. I definitely did not get the impression the insurers charged the homeowners for legal costs. Not sure how they could do that. The fellow in the article incurred legal costs fighting his insurance company, and the insurance company charges their legal costs to FEMA. Might have different info in the video, not sure.
I'm still not sure I totally understand what insurers did here--were the profits we are talking about from administering claims under the FEMA flood assistance program? Like, essentially, are the insurers who sell flood insurance under this program even taking on risk, or is it mitigated by FEMA? That's what would make sense to me -- in Canada insurers don't often write flood insurance because for the people in flood-prone areas who need it most, it's basically a sure thing that the insurer will lose money. "Overland flooding" is excluded from most homeowners policies here by default. Like, the premium would be absurdly high for that to be profitable coverage on their part, and by and large people would not be able to afford it. My guess would be that's why this FEMA flood assistance program exists in the first place. So if the insurers are writing the policies and administering the claims for the FEMA program and the money for that comes in part from FEMA--who I am assuming subsidizes the costs of writing these policies and paying these claims so that flood insurance is something that people can buy--then yes, I would imagine their margins look pretty good. They're not taking on as much of the risk and are charging FEMA for their work in resolving flood claims.
That said the stuff that adjuster guy was talking about, where managers are telling them to remove things that should be covered -- that's a pretty serious issue if that's happening. And the fellow whose foundation was supposedly "long-term damage" according to his insurer...aside form the ethical issue in bullshitting a guy whose home was destroyed, I'm pretty sure even as a business move they should not have gone to court on that. That kind of allegation needs to be substantiated if you go to court. That's probably running up money comparable to what the claimant is asking for just in expert engineering reports and legal fees. You don't do that on a hunch, you pay the damned claim. How did that even happen? I feel like there's a lot we're missing on this.
posted by Hoopo at 9:30 AM on June 1, 2016
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posted by Yowser at 2:50 PM on May 31, 2016