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Insurance Firms Made More than $400 Million Annually After Hurricane Sandy

Tue, Jun. 07, 2016 Posted: 05:14 AM


It's been more than 3 years since Hurricane Sandy struck the East Coast and devastated the shores of New York and New Jersey, leaving many people without a place to call home. Unfortunately, many homeowners who faithfully paid their flood insurance are still waiting to have their homes restored to livable conditions, and in the meantime they've had no choice but to rent a temporary residence while still having to pay the mortgage and insurance on their damaged homes. However, not everyone was forced into a bad situation by the storm, as reports indicate that the insurance companies raked in an annual average of more than $400 million in profit after the disaster.

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Business Owners Better Off Than Homeowners

According to Business Insurance USA, the majority of businesses were able to get back up and running within months of the disaster, despite homes in the surrounding areas still being in need of repair. While workers' compensation, general liability, and commercial auto insurance are three of the most common lines in the industry, a large amount of building and structure coverage was paid out to policyholders following Sandy, allowing many local shops to get back to business in as little as a few weeks after the storm.

FEMA Paying Private Insurance Companies Too Much

The National Flood Insurance Program (NFIP) was started back in the 1960's as a way to help homeowners cover the cost of repairing flood damage to their homes. However, the program has been running a deficit from the beginning and is currently more than $23 billion in debt. The former federal insurance administrator, Robert Hunter, says that the main reason why the program is in debt is because it allows FEMA to pay large amounts to the private insurance companies, while also not charging homeowners high enough premiums to sufficiently fund the program.

Flood Insurers Pocketing More Than 25% Profit

According to stats from the NPR and Frontline, FEMA pays private insurance companies almost 30% of the funds put into the NFIP. On average, between 2011 and 2014 private insurers made about $330 million profit on $809 million worth of reported insurer expenses. To clarify, that is the average annual amount, not the total over a three-year period. Roy Wright, head of FEMA's flood program, has said that they're currently working on increasing supervision of the firms in charge of administering the program, and has acknowledged that previous oversight was “not enough.”

FEMA Working on Oversight and Transparency

Fortunately, after the NPR reported the aforementioned statistics, FEMA announced that they're working on creating more transparency and oversight in the claims process. They've also stated that policyholders will be assigned someone to personally help them through the appeals process, which is good news for any of the homeowners who felt like they were treated unfairly in the months and years following Hurricane Sandy. The agency's acknowledgment of flaws and the promise to improve could give some hope to homeowners who have already all but given up.

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Veronica Hanks