The embattled National Flood Insurance Program is currently facing reformer’s zeal.
A new bill from US Senator Kirsten Gillibrand would significantly alter the way FEMA documents insurance claims under NFIP, with the goal of holding insurance company contractors more accountable.
Under the Flood Insurance Transparency and Accountability Act, FEMA would make insurance claim documents available to homeowners online, allowing them more involvement in the process following flood-related damages. It would also prevent FEMA from excluding certain types of damages from its flood insurance program.
The reforming legislation comes after reports suggesting contractors hired by insurance companies altered engineering reports to eliminate flood as the cause of damage in the months after Superstorm Sandy ravaged the East Coast. More than 16,000 claims are still under review for malfeasance, and Gillibrand says property owners ought to be better informed on what is happening with their claims.
“It’s unacceptable that any family who suffered through Superstorm Sandy would then have to suffer through this kind of bureaucratic incompetence,” she said. “And we should do everything we can to make sure that it does not happen again in the future. We can’t control where or when a hurricane lands, but we certainly can control and prevent fraud.”
Gillibrand and other lawmakers have in the past made calls for more significant reforms to NFIP, which provides flood insurance to property owners, administered through private insurance companies. Earlier this year, Gillibrand and two other Democrats in the Senate called for the dissolution of the program as a whole or at the very least, a change in compensation for insurers servicing NFIP policies.
“They take 30 cents of every premium dollar to sell and service policies,” said Senator Robert Menendez, publicly questioning whether insurers earned their average $1 billion profits through the program. “Policyholders aren’t always getting their money’s worth.”
That 30% premium fee is unacceptable, Menendez said, given the recent Sandy controversy.
To dismantle the government-backed system now, however, would be a seriously negligent decision, say industry representatives.
Robert Hartwig, economist and president of the Insurance Information Institute, said scrapping NFIP would result in fewer options and less choice for consumers and an even stronger monopoly for the government.
