WASHINGTON–The House Financial Services Committee will look intoallegations of an apparent “failure of the insurance system” todeal appropriately with claims arising from Hurricanes Katrina andRita.

Reps. Barney Frank, D-Mass., chairman of the panel, and MelWatt, chairman of its Oversight Subcommittee, late yesterdayannounced the panel's plan for an inquiry.

The comments were prompted by a call for a thoroughinvestigation of the industry's handling of Gulf Coast storm claimsby Rep. Gene Taylor, D-Miss., in a letter to Rep. Frank dated Jan.5.

Mr. Taylor is suing his insurer State Farm over a claim hesubmitted for damage to his home following Hurricane Katrina.

A federal court jury in Mississippi last week awarded $2.5million in punitive damages against State Farm for bad faithhandling of a Biloxi couple's hurricane damage claim.

“We have received from our congressional colleagues whorepresent the Gulf Coast serious allegations of a failure in theinsurance system to serve the purpose for which it was intended,”said Reps. Frank and Watt.

“We believe these allegations deserve appropriate attention andour committee will be looking into these charges,” Reps. Frank andWatt said.

But a spokesman for the panel said the committee hasn'tdetermined yet how it will deal with the issue, and that a decisionwon't be made until next month because the committee is stillorganizing.

Rep. Taylor has repeatedly criticized the insurance industryover the handling of hurricane damage claims. In his letter to Rep.Frank, he wrote, “Despite billions of dollars of federalassistance, south Mississippi's recovery is obstructed by theactions of private insurance companies.”

His letter called for the committee to investigate what he calls“the denial of claims wherever insurers could blame flooding” and“excessive premium increases, market withdrawals and other actionsto force states to make concessions or assume more coastalrisks.”

In his letter, Rep. Taylor noted that Sen. Trent Lott, R-Miss.,whose home was destroyed by Katrina, had secured language in aHomeland Security Appropriations bill mandating a GovernmentAccountability Office study of claims adjustment of wind and waterclaims relating to Hurricane Katrina.

The report is required to be delivered to Congress by April1.

“I ask that you not wait until then to begin the committee'sinvestigation,” Rep. Taylor wrote. “It is clear that the insurancecompanies have a conflict of interest when allowed to assigndamages to the federal flood program rather than tothemselves.”