WASHINGTON–The Government Accountability Office in a report released today recommended that Congress give the Federal Emergency Management Agency greater authority to scrutinize private insurers' handling of federal flood claims.

According to the GAO, FEMA should have the ability to access detailed reports of how Write-Your-Own insurance companies went about assessing how much loss storm-damaged homes sustained from wind and flooding.

Congressional critics have charged that insurers after Hurricane Katrina inappropriately attributed most of the destruction that homes sustained to flooding covered by the National Flood Insurance Program, saddling the NFIP with damage claims that should have been covered by private insurers' windstorm policies.

The report was prepared by the GAO at the request of Rep. Spencer Bachus, R-Ala., ranking minority member of the House Financial Services Committee.

The GAO said Congress should grant FEMA, the parent agency for the National Flood Insurance Program, which pays flood claims, the authority to access WYO insurers' wind claims data and adjuster guidance even though the agency said that would place “unneeded burden and costs” on the NFIP.

The GAO report also recommended that states improve the “quality and consistency” of their oversight of adjusters who make the decision as to whether wind or water was the cause damage to property from a hurricane.

Responding to the report, Rep. Bachus said it “contains a number of sensible recommendations that will bring clarity to the process” and “warrant a thorough discussion in the Financial Services Committee.”

The GAO said Congress should consider providing FEMA clear authority to obtain wind damage claims information from WYO insurers, as appropriate, as well as the policies, procedures and instructions used by WYO insurers for determining wind damage versus flood damage when properties are subjected to both perils.

Responding to FEMA's concerns that the NFIP doesn't have the staff to evaluate such information, the GAO argued that “such authority would enhance FEMA's ability to monitor and reevaluate the accuracy of NFIP flood damage payments that result from the wind and flood damage apportionments and its controls over the inherent conflict of interest involving WYO insurers that sell and service both wind and flood policies.”

The GAO also said that while the National Association of Insurance Commissioners did not issue a written response, it agreed in general with the report's recommendations that regulators “enhance the quality and consistency of standards and oversight for all types of claims adjusters.”

The Property Casualty Insurers Association of America issued a statement in which it said that it “agrees that adjusters should be well trained and regulated as provided by state law, because it is of the utmost importance to policyholders that adjusters are able to do their jobs in the most effective manner possible.”

Cliston Brown, director of federal public affairs for the PCI, said, “We are ready to work with federal legislators and state regulators to ensure that the National Flood Insurance Program is administered correctly and that all consumers are treated fairly before and after a disaster strikes.”

Mr. Brown explained that of “even greater concern is the need for Congress to renew and improve the National Flood Insurance Program before it expires on September 30, 2008.”

Passing legislation to keep the NFIP in place “is our top legislative priority in 2008, and we urge members of Congress to act expeditiously to preserve and enhance this vital program,” Mr. Brown added.

Special Reports /

GAO Says Congress Should Okay Flood Claims Inquiry

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