Business of Disaster (full documentary) | FRONTLINE
[Music] sandy swirls along the east coast don't forget that's my point that's why i came here more than three years after superstorm sandy frontline and npr correspondent laura sullivan investigate the insurance company said oh no no that was pre-existing the red tape and now i filled this same application now three times the same apple the same as this pile yes the controversies this is a classic dispute where they gave her just a little bit of money i saw blanket denials across the board there's no evidence of any systematic issues with respect to how the claims were adjusted or how the claims were paid and the profits 400 million dollars in profit how do you explain that while we were providing oversight it was not enough a frontline npr special report people are profiting unfairly on other people's misery business of disaster [Music] [Music] we looked around and tried to find the perfect spot between brooklyn where i grew up and she grew up from jersey so staten island was the medium but we said this is the place we want to live he loves fishing it's right off the water and it just fit into our life there was a lot of joy and happiness that this ocean brought to us the ocean could be joyful and the ocean could also swallow you up at any given time you know it's danger unpredictable swirls along the east coast the time for evacuation is over get back behind the building fish in staten island for 20 years you pretty much know what the tides are the tide was the highest tide i ever seen on staten island i ran up the whole entire block and i said this is the storm we have to leave there's a good chance you're gonna die seven subway tunnels under the east river are flooded the entire system is shut down there was a explosion and a transformer we are essentially in a blackout the island of manhattan all but shut off [Music] i just couldn't understand when i saw water coming out from my son's bedroom underneath the door and i'm like what the heck is that we went to the window and the car was being washed down the block already there's no escape now now the thing is we're stuck in this house well upstairs and we're watching the water level rise as it's coming closer to the top step i'm wondering where are we all going to go as the sun rises on the devastation staten island badly affected by flooding the real tragedy from sandy is the number of people who have died and that number grows it seems by the hour the morning after the storm i travel down far the capitano boulevard which is the main thoroughfare right on the shoreline i saw boats and cars up on people's property i saw holes in homes and when it's your home community you are instantly numb i was beginning to understand the ferocity of mother nature but really had no idea just how difficult recovery would be they were hit as hard as anyone president obama will see for himself the damage inflicted on the folks and homes of staten island so to have the president come was a big moment for us [Music] i think a lot of staten islanders whether they like president obama or not thought all right we'll get the help that we need good to see you and i never expected the president to just walk into the crowd and put his arms around my wife and i i was like wow so some of this is going to be tough but here's what my commitment to you is i'm going to stay on it he promised uh that he would cut all the red tape he was going to make it right he's going to make it right not to worry don't forget about us that's it that's my point that's why i came here a blessing it's always good when a politician comes after the election economic damage from hurricane sandy superstorm sandy could cost 20 billion bow 78 billion my instructions to the federal agency has been i want you to cut through red tape bureaucracy make sure that we are getting the resources where they're needed as quickly as possible all the sandy survivors can everybody get over here we're going to be shoulder to shoulder are we standing together until we're all home yeah are we standing shoulder to shoulder until we're all home yeah all right [Music] as a reporter for npr i've covered quite a few disasters and the slow process of recovery from katrina to haiti i've investigated problems with disaster aid and looked closely at efforts to rebuild for the past year i've been hearing stories about superstorm sandy victims a group of them gathered last fall here at the state capitol in trenton i'd like to bring up one of the families that really can use help good morning my name is nancy wurtz me and my daughter samantha are still three years later without a home facing foreclosure and we still need help thank you [Applause] i was surprised to learn just how many homeowners were still struggling it's important that the people across the street understand that thousands of us are still not home yet we have billions of dollars from the federal government and those billions still haven't reached the people who need help this is where our house was as i talked to sandy survivors they told me about problems with insurance so the insurance company said oh no that was pre-existing everything that's wrong it was there before the storm and nightmares of government bureaucracy if i send them an email i'd probably get a response within like you know like about a month later or two months later and there was one story i heard over and over from so many homeowners like doug quinn you know i was optimistic it's going to be okay everything's going gonna be okay i've been in worse spots than this i'm sure i'll work it out is that what happened it's three years i'm still not anywhere close i should be at home in my house and part of my community and instead i'm here doing this as a country we spend billions of dollars every year to help people like doug quinn money that's supposed to get them back on their feet and protect them from the next storm over the past year we've been investigating where those billions are actually going and why more than three years after sandy storm survivors are still not home that question took me to a dirt lot in toms river new jersey where i met up again with doug quinn wow how are you quinn moved to this waterfront neighborhood in 2011. nice to see you again he'd always dreamed of living on the water yeah this is it this is what's left of it at least my house was over this way my front door would have been right over here it was nothing fancy it was a comfortable cozy middle-class home as soon as i came here i just was definitely spoke to my heart that this was home what remained from that home was still on his lot so this is the stuff that stayed dry yeah it all fits into a box huh this is everything this is all you've got you get weird with stuff after the storm because everything within my house was destroyed so the process of just pushing all of my possessions out of the front door into a big pile on the lawn was really difficult he had no idea that the really difficult part was still ahead he just assumed there's going to be a small period where life will be a little topsy-turvy and then we'll work our way back to normal i did buy flood insurance as a contingency and that's what it's for he's right his situation is what flood insurance was designed for but most flood insurance is different from other homeowners insurance it's run by a government program created after a series of massive floods in the 1950s and 60s along 400 miles of the kansas and missouri rivers the worst floods in u.s history inundate thousands of square miles of land the u.s was growing
rapidly at that time and increasingly homes were being built in vulnerable areas so time after time the federal government was being called upon to provide disaster aid and people had very few options even to purchase insurance at that point in time the insurance industry had said floods were too risky to cover so congress set up the national flood insurance program in 1968. the program paid private insurance companies a fee to sell policies and settle claims especially in flood prone areas the premiums from those policies would be used to cover all losses unless a disaster got too costly then taxpayers would make up the difference insurance companies don't have any risk in the program the risk is all the taxpayers bob hunter ran the flood program in the 1970s and he says he had problems with the insurance companies from the beginning we developed information that that showed that they were charging us too much and the taxpayers were paying them too much money at the same time they were also refusing to pay what we thought was some legitimate claims and ultimately we kicked them out of the program how'd they take that they didn't like it they went to congress and tried to to fight it but congress stood with us and they left but they weren't out of the program for long the 1980s brought a new president and renewed faith in the private sector a flood is coming you're trying to keep it from destroying everything the insurance industry was brought back into the flood program to sell and service policies and expand its reach ask your insurance agent about national flood insurance now by the early 2000s fema was overseeing the program and four and a half million homeowners had government-backed flood insurance now that number goes up and down depending on the frequency of floods that exist nothing sells flood insurance like a flood and the floods kept coming incredible pictures show the ferocity of hurricane wilma in 2005 a series of devastating hurricanes put the national flood program deeply in debt we've seen neighborhoods that have been flooded none more than katrina the city absolutely devastated by katrina for all intents and purposes immediately bankrupted the national flood insurance program which had to resort on borrowing from the u.s treasury by the time sandy came around the flood program was nearly 18 billion dollars in debt and that debt was going to have a big impact on thousands of homeowners like doug quinn so this is it this is it this is the rental that i've been in since uh the month after sandy i pay for this plus in my sandy damaged property i pay for the mortgage and particularly insulting i pay the flood insurance flood insurance on a house that doesn't exist how are you affording this i'm not i'm going broke but he had an even bigger problem so how much insurance did you have on this house uh i had a 250 000 flood insurance policy i bought the maximum amount that i was legally allowed to buy who would you get 90 000 can you build your home again for 90 000. not even close
he was convinced he'd been underpaid he hired his own experts who said it would cost 252 000 to rebuild his home so he filed an appeal with fema and then he waited for nearly five months so finally i get this letter from fema fema concurs with selective's final decision and no further administrative review can be provided through this appeal process they sided with the insurance company what did you do i hired an attorney yeah there was nothing to do like i say i'm 51 years old i've never sued anyone in my life and my back was against the wall because i knew something was wrong here to understand quinn's fight with the insurance company i had to journey deep into the complex world of flood coverage the search took me to new orleans and a high-stakes legal battle hi you john hello laura sullivan nice to meet you very nice to meet you as well john hoteling is a bit of a new orleans legend a plaintiff's attorney with a taste for french antiques so it's restored just like at the time he made millions for his clients and for himself taking on the insurance companies after katrina insurance policies even for a lawyer that's been doing this for a long time they're very complicated i mean they're thick if you've ever tried to read an insurance policy it's very difficult to read it's not written plain language there's lots of loopholes in it lots of exclusions so everybody here is working on sandy and these are the clients that we represent after sandy hoteling focused his law firm's attention on problems developing with flood claims in new york and new jersey i looked at some of the cases and i had never seen anything worse in my entire career [Music] he eventually signed on to represent about 600 sandy victims in lawsuits against 20 insurance companies and he says the companies used a variety of ways to systematically underpay homeowners if you look at this all of these neighborhoods were all underpaid uniformly they used the same process to underpay everybody as the lawyers dug into the sandy cases they made a shocking discovery the fema run national flood insurance program appears riddled with widespread cheating thousands say they have become victims again evidence that several engineering firms the insurance companies were using may have committed fraud a big time texas attorney steve mauston had joined hoteling in the fight these are notebooks that were used at some of the hearings that we had and this one here the lawyers found engineers who said their managers changed their reports without them knowing about it this is the original first this is the original report this is what the engineer tells him out at the house the physical evidence observed at the property indicated that the subject building was structurally damaged by hydrodynamic forces associated with the flood and then we go over here and it says the physical evidence observed at the property indicated that the subject building was not structurally damaged by hydro nano forces not flat same report same report same engineer supposedly i'm talking about a process where a person who never went to the house never saw the house never discussed with the original engineer changed the report va's engineer the engineering companies accused of fraud wouldn't talk to us and neither would insurance companies involved in the lawsuits this here it says but both argued in court that the reports have been changed through a standard peer review process i can't comment on any individual engineering report or whether or not there had been changes or what the reason for them for those changes were but what i will say is that in a peer review process can two engineers potentially disagree as to the cause and to the amount of damage that occurred that can happen but as the lawyers dug deeper they uncovered another suspicious pattern this is the conclusion but the observations right this is if the observations are what they see at the house or identical okay in report after report after report and every one of them says long-term differential movement not structurally damage long-term differences not strictly damaged the lawsuits focus attention on what would become the most controversial exclusion in flood insurance long-term differential movement a long-term differential movement it was the same exclusion quinn's insurance company used to deny coverage for his foundation foundation that was caused by long-term differential movement of this it's known as earth movement and it's considered a pre-existing condition they said that it was long-term earth movement it was damaged those big cracks in my foundation that was all there before the storm and they said the earth had moved long-term long-term movement shifting which mysteriously is not covered by flood insurance is it possible that the earth movement exclusion might not be in the best interest of homeowners but it is in fact in their policies and it's written there and that's what they're paying for we have no dispute that there's an earth movement exclusion our dispute is did the flood trauma break the foundations of the homes or was it like that before they're making up fake facts to put it into the exclusion that's the problem in february 2015 the fraud allegations state authorities raided a uniondale engineering company today prompted investigations by state attorneys general in new york and new jersey that are still underway armed with a search warrant investigators removed dozens of boxes from the building and in washington criticism over fema's management of the program was growing the administrator of fema craig fugate declined to be interviewed but amid the controversy he replaced the leadership of the program and promised a wide-ranging overhaul the new head of the flood program is roy wright what do you think was happening with these examples of forged signatures and not just changed conclusions but changed observations of all the issues in front of me i find these engineering reports to be the most maddening many of them were done right but i've seen reports where they took pictures of damage they described the damage and when you get to the conclusion on page 32 they said there was no damage that's shoddy sloppy work is it sloppy work or is it fraud you know so the questions of fraud i need to leave to the legal investigators to play out i look forward to what the state's attorney generals could bring to me this was happening across multiple engineering companies represented by multiple insurance companies how is this happening across so many different platforms if it was just shoddy work so and this is a piece that i'm here to fix uh there is no incentive in this program to do anything other than pay for everything covered under the policy [Music] on the face of it the companies don't seem to have an incentive to underpay homeowners they don't pay claims with their own money it's the government's money but as we continue to investigate we heard stories from industry insiders about the pressures to keep payments down one veteran of the flood business told me what he'd seen happen over the last decade hurricane andrew katrina hugo the north ridge quake the world trade center disaster anything disaster related that's all i've ever done is disaster relief work okay oh david charles took me inside a sandy damaged home boy yeah this is a mess he now helps homeowners fight insurance companies but for nearly 30 years those companies hired him as an adjuster it also feels like this house is leaning it is you can feel it as you walk his job was to figure out how much the national flood program should pay homeowners this is a classic dispute where they gave her just a little bit of money and the house needs to come down he says the program changed after katrina amid mounting debt and concerns about overpayments on flood claims there was so much money spent on katrina the insurance companies paid out so much that there was a noticeable sea change in the attitude of the insurance companies going forward how do you know that well i worked the claims and i felt that coming down from middle management telling me how to operate you were told to be stingy no not told to be stingy but things that i used to pay for were being rejected every single change that they made reduced the cost there was never anybody telling you to increase it why do you think they were doing this to save money they were getting tremendous pressure from congress to tighten up everywhere that they could and one of these was to make sure that there's no overpayments on claims the pressure to tighten up intensified after sandy according to several other adjusters who agreed to speak with us yes one of them was jeff coolidge a manager who oversaw sandy claims what happened when you started adjusting claims in sandy guidance was coming back from the carrier saying remove these items so i would send those back to the adjuster saying remove uh let's find a fine example remove the fireplace fireplace well they need to have an expert come in we'll put it on the insured or the policyholder to prove additional monies are owed so it was a systematic way of lowballing these insurers to say 80 percent of these people will never come back and ask for more money you're saying that your supervisors or your insurance insurance companies that you worked for were telling you to pay homeowners less yes and and that was done on a wide spectrum to help control spending after katrina fema increased its auditing of flood claims some of the most expensive claims originate here in the basement yeah there's ocean grass the worst thing i've ever seen in 37 years is the earth movement exclusion and the foundation is obviously the most important element of any building that's the most expensive things to fix these are cracks that that's fresh if there's any one place that they shouldn't be cutting coverage and making things more difficult for the homeowner that's the place despite homeowner complaints a senate committee last year said it couldn't find any widespread problem of underpayment there's no evidence of any systematic issues with respect to how the claims were adjusted or how the claims were paid an event like sandy would you expect some disputes to arise after an unprecedented event of that magnitude yes you would expect some to arise but they were very small in number why do you think so many people alleged and felt that they had been underpaid i think that the national flood insurance program has been under attack since katrina and i think that they thought that if they didn't protect this pot that they had if they went deeply into debt again there would be a push to end the national flood insurance program and for some of these companies and some of these lawyers and some of these engineers that's how they make their living that raised a question we wanted to get to the bottom of how much money do insurance companies make off the flood program it's not easy to find out we looked at what's called the arrangement that's the contract between fema and the insurance companies every year the companies take about a third of the premiums they collect as fees for running the program the rest goes to settling claims those fees come to about a billion dollars a year sometimes more depending on the number of claims and policies so how much of that is profit seven years ago congress's investigative arm the gao told fema to figure that out do you think you're paying the insurance companies too much you know there's a cost to running a business um and we are a private public partnership that is there uh but the costs are one of those things that i'm examining what kind of a profit do you think they're making i i've never looked at the book of business to understand their profits that's a big statement for somebody that is giving uh insurance companies so in every instance then in excess of a billion dollars a year to not know what their profit structure would be on that you know so flood is one of the perils that these companies run so you need to go specifically to the companies to understand those numbers since the insurance companies wouldn't agree to be interviewed i asked their representative about the profit margins do you know for a fact how much it actually costs the insurance companies to run the expenses every year the the insurers will will price their services to cover their cost and what they consider a reasonable profit margin other than that do you know what that profit margin i don't off the top of my head no but if they didn't think it was reasonable then they would not participate in the program why is it so hard to understand how much the insurance companies are making how much they're paying what their expenses are and what their profit is because obfuscation is helpful to them in this situation and we've never seen the numbers fema should get them and publish them hey jim it's laura sullivan from npr we started trying to find those numbers the data that would help us figure out what kind of profits the insurance companies are making to take care thanks so much again and that would take some time but our investigation took us to another stream of federal money beyond flood insurance new york city got its plan for 1.8 billion insurance only goes so far and many don't have it at all so when big disasters strike congress sends billions of dollars to state and local governments to help homeowners rebuild to see where that money is going i head into staten island at a local non-profit in midland beach i met up with tommy consolo this is before the water came he helps homeowners apply for the extra housing aid this is where all the water went 15 feet is what we got this is 15 feet of water is the damage really bad throughout these neighborhoods every single one of them can we go see it let's go sandy devastated communities along the eastern shore of staten island [Applause] this was like a giant ocean yeah we're driving right now the ocean was here it was over the signs many homes have been abandoned anyone that's got the boards on them they're already bought out and they're gone and for some that stayed building back means taking extreme steps to stay above the next flood see how high it's going to be whoa that's the height you gonna walk up to a front door up there yeah no yep that's the height that's where you got to be at to survive i could see there was still a lot of work to do did you think it was going to take three years to get to this point not at all i once told somebody i said you know what we built the empire state building in one year how can we not rebuild single-family homes the job of rebuilding these homes in new york city it's the responsibility of a special housing program called build it back we've created a powerful program the program got 1.7 billion dollars from washington and we've secured federal aid money the name of the program is nyc built with that and it's here to make your home safer our community stronger one family that was told they'd be among the first to be helped by build it back was diane and nick camarada the couple the president had comforted don't forget about us that's my point but three years later they were still living with a fish tank filled with sandy storm water this is our fish tank is this the water from the the tidal surge yes this is tidal surface tidal surge plus the fish tank water i mean everything must have been interesting because the water actually went up to the top step before my second floor the water came all the way up here this whole floor was underwater underwater this used to be your entryway this was our camaradas were still waiting to get their first floor fixed up and their house elevated television our couch our living area like many homeowners they gambled and didn't have flood insurance they were now counting on help from build it back do you know i had to itemize every single thing that i lost diane showed me what that process has been like i know i filled this same application out three times no this one the same apple the same aspect yes how do you keep all of this straight i have no choice but to keep it straight i have to know where everything is so when somebody says oh you didn't fill this out or you didn't fill that out here it is i filled it out i filled it out three four times it wasn't just lost paperwork it was also hard to get a straight answer you would talk to one person and then if you would talk to another person you would get a totally different story so who do you believe you know so you're going on good faith you're trusting what this person says you're doing everything he says then when you go back and that person's no longer there and this person takes over and you're getting a totally different story all that time goes by and nothing's been accomplished the camarades frustrations with build it back were far from unique the new york city comptroller audited the program's first year people came in expecting to file paperwork and then go through a process and what really happened was people would come in deliver their documentation and it would vanish is it is this incompetence it's gross gross incompetence the city had hired outside consulting firms to run the build it back program at a cost of 50 million dollars this is the whole contract the auditors discovered why so many homeowners were frustrated the people that were on the front lines helping victims were they qualified to do this work many were not how did what did you find what are you how do you just found that the resumes did not match the job caseworkers were supposed to have a degree in social work or experience in the field but a review of the resumes show that most had no social service experience at all some were cashiers at walmart staples and rite aid think about how outrageous it is that we were paying these huge consulting companies hundreds of thousands of dollars a month for creating a system using unqualified people with no oversight by the city how bad was the damage here we had a lot of damage bride gear was the top official overseeing sandy housing recovery for new york city the water came up from the east river which is right there and covered this whole area he's a 20-year veteran of disaster recovery and we wanted his explanation for the problems with build it back i saw that we as new york city with all the best intentions created a big hard to understand bureaucratic slow inefficient process for getting people funds or to get them back in their homes why did that happen the system makes that happen you can't expect any government large or small to create a two billion dollar corporation and expect them to roll that out in any short period of time and not have a chaotic mess you can't build this thing on the fly and expect it to work the contractors came and gave their best estimate of what they thought they could do to make a profit it's not a charity right were they making excessive profits i don't know were they making excessive profits i don't know that was a question we had so we got records of build it back payments to the consultants during the first year and this is what we found the consultants were getting paid to provide caseworkers based on rates of 40 to 100 an hour but in fact the firm paid less than 18 an hour to attempt agency for some of those case workers the one thing that stood out of this audit the consultants always got paid and that became what this was about we're not making widgets these this is not like we screwed up the conveyor belt these are people whose homes are still gone and and life has been upside down for three years think about it like they don't know where where it's going um and i won't even get into the sort of um unless you want to get into the let's take a home that's worth 80 000 and let's pour 600 000 into it to elevate it and rehab it is that what's going on uh that that's one case that happened and we it was a it it's um oh my god where do you start that six hundred thousand dollar house we found it here on topping street this house should have been a total knock down the city came in did their survey and said no we can lift it and they did they raised the house up in the air and then they came in and they looked up and my hands are gone they looked up and they went uh-oh why what was up because they realized how everything was just everything was shifted the house fell apart and had to be entirely rebuilt in the air my neighbors and i we joke about it sometimes what it actually cost to put these houses up the ones that were miscalculated because i could have gotten myself home and my neighbor next door who's still waiting after three years and that's hard on me yeah why because i'm home and they're not yeah the head of build it back is amy peterson one of the homes that we saw is a home not too far away from here where build it back spent six hundred thousand dollars to raise a house does that make a lot of sense to you so that's a good example because i know the home you're you're talking about that's a good example of kind of learning as we go along sometimes when you start to elevate a home and you start to take kind of the skin away from the home you realize there's a lot of structural work that has to happen and so we have faced those situations the the work that we're doing moving forward we're making changes but it costs money to build elevated homes um within kind of these tight communities does it cost six hundred thousand dollars we're looking at all of the costs across all of our programs and trying to figure out the the best way to do this out on the streets of staten island i could see the challenges with rebuilding in these increasingly risky areas some homeowners had had enough you live here is this your house you this used to be your house yes after sandy you end up leaving yeah do you think you're coming back no you're done i'm done i want to pay you off the mortgage i don't know if build the back is going to buy it or if i'm selling it to a private person some homeowners were content keeping things the way they are i want to give us money to knock these down to build two separate ones higher up off the ground it's not really worth it for us why knock things down that we're making rent on that makes no sense others were worried about the choice they faced i'm fearful that these bungalows should not be elevated you know i mean i'm not an engineer you know maybe engineers can say differently but i mean these are 90 year old homes that i just don't think were built to withstand these elevations okay everyone seemed to have their own concerns i just want to show you something here's a front door they said they can't put a stairway here to get up they want to put a elevator in our lift in the backyard you got to walk 72 feet around the house to get to the elevator in the backyard the more time i spent here and the more people i talked to the more complicated it all seemed it was hard to see where all of this was headed what's the plan here after the storm there was a lot of thoughts about what individual communities wanted but in the end it's about what individual homeowners want and so some homeowners are committed to elevate their home some homeowners have decided to sell their homes you say it's up to the homeowners depending on what they want you could end up with neighborhoods where half a block is empty half a block is still below sea level some of the houses are raised is this something that makes sense for our communities i think that helping these communities get to be more resilient is um is that more real it's important i think every single home that gets raised is more resilient is it possible that in some of these areas we shouldn't be rebuilding at all you know a city that has as much coastline as we have that has you know generations and generations of families that have lived here that if there there's ways to to make these homes and neighborhoods more resilient it's important to keep these as part of the fabric of new york city it does it makes sense to have different people doing different things on the same block different communities doing different things right next to each other in terms of resiliency does it make sense no anything that is happening in a non-systematic way inherently isn't going to make a lot of sense does it do exactly what the programs as they're currently designed do yes it gives individuals the choice and it doesn't tell them that you have to participate in a solution that's better for your block or your neighborhood or your community or your state there's no larger strategy where we say what do we want to have this community look like before the next one hits new york city has taken greater control over build it back and has renegotiated its contracts to try to speed up the process and save money the program plans to spend 1.7 billion dollars to help about 9 000 sandy homeowners about 20 percent of the homes are expected to be elevated so far 64 of those have been completed one family still waiting to have their house elevated was the camaradas and before i left staten island i wanted to see if they were any closer to getting it done hi hi stranger good to see you there were signs of progress no fish tank no fish tank no fish but it turned out their plans were still mired in red tape it looks fantastic it does they did a wonderful job you know the furniture is coming and when are you getting settled going to get ripped out they're going to tear out all the renovation when they lift the house they're going to rip all of this out every bit of it before build it back will elevate their home the camarades needed old building permits closed out and that meant they had to fix up their first floor so basically they're going to come halfway up the walls and then they're going to push the house up in the air and everything that was just done in the house was just to close the permits it's crazy when you see what the storm did to these people and then you see what government has been doing to them yeah this is the most infuriating frustrating experience of of probably of my life not just my career people made some mistakes and um we need to make sure that others learn from them benefit from them and don't repeat them [Music] the federal agency that oversees housing programs is hud i asked the agency's head of disaster recovery about the delays and problems with build it back at some point isn't this an oversight issue for hud so absolutely we're overseeing them we're working very closely with them to ensure that where there are these problems that they're getting solved do you feel like you could have maybe brought a little bit more of a hammer down to make some of these problems go away ultimately there aren't a lot of hammers here the way that the congress provides the money they want us to let the local governments make those decisions and this is what our communities are now going to look like these sort of ad hoc streets and neighborhoods i think that's up for the affected communities to decide they get to make the choices about what to do with the dollars that we provide to them but is there a better way of doing this i hope that there is or that we can all work together to do it this way even better because that's what people are counting on the federal government for in the aftermath of all the sandy troubles fema 2 has been promising changes so this is the sandy claims review center that we have here where all of the work comes in for the folks that we are looking at their claims again a year ago it gave 144 thousand sandy homeowners who had filed claims a chance at a new review 19 000 homeowners came forward and so far nearly 80 percent are getting some additional money tell you what do me a favor take a look at the photos on that file but some homeowners say fema is still underpaying those claims and the review process alone has cost more than 100 million dollars since last year the agency has also been settling those lawsuits against the insurance companies now nearly 1700 in all there was a deadline for me to accept i did accept one of those settlements was toms river resident doug quinn he got an additional 130 thousand dollars but it won't all go to rebuilding his home i won't get all that money a third of it is going to the attorneys they will not cover me for law for legal fees they won't do legal fees oh no they'll do legal fees they'll pay the legal fees for the insurance company that tried to cheat me but they won't pay for the storm victims legal fees so i had to pay over 40 000 to a law firm because my government would not honor their obligations that they made when they accepted my premium money and that money's gone that's not going to be used to rebuild my house why does fema pay the legal bills of the insurance companies so these are some of the contract stipulations that i inherited uh and uh we're making some specific changes because at the end of the day um i want dollars to go to policyholders not to lawyers figuring out where all those dollars do go was exactly what we've been working on trying to determine the profits the insurance companies were making off the flood program fema wasn't keeping track but we finally got a hold of some key data the expenses the companies report to state insurance regulators and from fema we got the fees it pays to the insurance companies using these numbers we calculated the profits before taxes companies have varying ways of accounting for their expenses and revenue but without access to their internal books this was the best possible look at the scale of profits here's all the fema data this is all the money that fema has paid the insurance companies we took our findings to the former head of the flood program bob hunter who's also an actuary so you deduct those expenses from what they received and you got there our analysis showed that between 2011 and 2014 total profits for all the companies in the program averaged about 325 million dollars a year is that too much money oh definitely because it looks we're talking about somewhere near 30 uh profit margin compared to what they receive as payments and they have no risk so what do you make of this then well it's obviously a sweetheart deal there was one number that really jumped out with all the claims in the wake of sandy the profits were more than 400 million dollars because they're handling a lot of claims that year and they get they get make a lot of money when they handle claims when a big storm hits then they make more money yeah at the very time you need them to make less money if anything because because of the burden is going to be born by the taxpayers they make a killing we explained our methodology and results to the insurance industry representatives they disputed our 30 estimate and said profits are really 10 to 15 percent after taxes but provided no additional data they also said several companies have left the program because the profits don't justify participating the gao is now examining how the insurance companies are paid and how much they make fema says it's also looking into these questions it's hard to look at profit numbers after sandy when tens of thousands of people believe that they were underpaid by the insurance companies and see that the insurance companies walked away with 400 million dollars in profit how do you explain that so what i can tell you is that i am focused on those policyholders and ensuring that they get the resources and they get the payouts that they are entitled to as we manage this program going forward we will provide the appropriate level of oversight because as i go back and look while we were providing oversight it was not enough [Music] they can't begin to fathom the amount of heartache that they've created the amount of financial records they've created for average people we're average middle class people and we're in ruins here it makes me really angry it makes me angry to watch the way that people are profiting unfairly on other people's misery [Music] is our country in a good place in terms of the next disaster no we're not in a good place you can look at any of these big disasters and ask yourself the most basic question did we put a bunch of money out yes is everybody mad yes did people get what they needed to get back into a home no is there a grand strategy national resilience strategy that says this is how we're going to deal with these big disasters when they happen no it's not there [Music] i don't think enough people know the different areas that can be affected by storms like this and something has to be set up because i don't think we could bounce back if it happened again [Music] [Music] for more on this and other frontline programs 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frontline frontline's business of disaster is available on dvd to order visit shoppbs.org or call 1 800 play pbs frontline is also available for download on itunes [Music] this [Music] you
2022-01-12 16:26
