WASHINGTON–The Senate late Thursday passed an amendment to legislation extending and reforming the National Flood Insurance Program, giving a consumer advocacy official in the Federal Emergency Management Agency independent authority to audit claims submitted under the Write-Your-Own flood program.
Under the provision, the Office of the Flood Advocate would audit claims to ensure that only flood losses are allocated to the NFIP.
The advocate would also have the authority to “conduct any other examinations to protect the financial integrity of the program and to prevent fraud and abuse and conflicts of interest.”
The advocate would be given the power to refer “criminal violations” to the Department of Justice, and to develop financial penalties that could be imposed on those participating in the program who fail to cooperate in “any investigation or for improper conduct.”
These penalties can include fines, suspension or removal from the program, according to the amendment.
The provision was part of 10 amendments lumped together in an umbrella amendment to S-2284, the bill extending the program until 2013. The provisions were adopted as part of the bill by unanimous consent.
Passage of the amendment was not listed in Friday's Congressional Record, and its passage could only be confirmed through the offices of Senate Majority Leader Harry Reid, D-Nev., and Sen. Richard Shelby, R-Ala., one of the managers of the bill on the Senate floor.
Adoption of the amendment was the result of more than a day of negotiations between representatives of Sen. Shelby, the ranking member of the Senate Banking Committee; Sen. Chris Dodd, D-Conn., the committee chairman; and Sens. Mary Landrieu, D-La., and Bill Nelson, D-Fla., authors of the amendment.
Passage of the so-called bipartisan “manager's amendment” is one of the final steps toward passage of the bill by the full Senate. That is scheduled to occur Tuesday, according to several Senate officials.
Passage in the Senate sets the stage for talks between the Senate and the House, which passed a somewhat different bill, H.R.-3121, last September.
The Senate bill would reauthorize the insurance program while phasing out below-market rates for second homes, increasing annual deductibles, and erasing more than $17 billion in debt accumulated as a result of Hurricane Katrina.
The program must be reauthorized because it expires at the end of the current government fiscal year, Sept. 30.
In a statement, Ms. Landrieu said the amendment would create an “independent ombudsman” to audit insurers and agents who participate in the program.
“It will ensure these companies are held accountable for the way they report damage to be paid by the national program and would ensure that middle and low-income Louisianans are not artificially subsidizing the insurance industry,” she added.
Several provisions in the manager's amendment deal with regional issues, and one denies premium subsidies for homeowners who make serial claims to the program but refuse to move.
Justin Roth, senior director, federal affairs, at the National Association of Mutual Insurance Companies, said that “following agreement on the bi-partisan managers' amendment, NAMIC looks forward to final passage of the flood extension and reform bill next week.”
He noted that NAMIC is “encouraged” by the addition of what he called several “positive” provisions in the amendment, especially one by Sen. Jim DeMint, R-S.C., mandating a study to look at the feasibility of adding building code requirements to floodplain management criteria.
“NAMIC has been a leading advocate in promoting enforcement and enactment of strong building codes, and we believe the DeMint language is a step in the right direction,” Mr. Roth said.
Regarding the “ombudsman” amendment, Ben McKay, senior vice president, federal government relations at the Property Casualty Insurers of America, contended that Sen. Landrieu “must have gotten her amendment from the redundancy department.”
He declined to be specific, but others in the industry cited provisions of current NFIP rules that establish five different levels of remedies in place for disputes. These include allowing consumers to file an appeal with the company that processed the claim; enlist a third-party appraiser; appeal to FEMA; go through a state mediation process, in which FEMA must participate by law; and litigate.
“To add a new investigatory office–in essence a special prosecutor, although that isn't exactly the title–for a small universe of 93 companies is unnecessary and redundant,” said an insurance trade-group official who spoke on condition of anonymity.
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