Pallone, Waters and 21 Colleagues Demand FEMA Provide Oversight of National Flood Insurance Program
WASHINGTON, DC - Today, Congressman Frank Pallone, Jr. (NJ-06), Congresswoman Maxine Waters (CA-43), and 21 of their colleagues sent a bipartisan letter asking that FEMA fulfill its legal obligation to provide oversight of the private insurance companies that participate in the National Flood Insurance Program (NFIP).
In the wake of Superstorm Sandy and other recent disasters, FEMA and NFIP have faced accusations of incompetence and fraud. A recent PBS Frontline documentary entitled, “The Business of Disaster” examined failures with flood insurance in the wake of Superstorm Sandy. Investigators concluded that private insurers made more than $400 million in profits from FEMA in the year that Hurricane Sandy devastated the Atlantic coast – its highest profit in the 4-year period from 2011 to 2014. At the same time, many of those insurers were underpaying or outright denying legitimate flood insurance claims. FEMA did not know how much these companies were making in profits. The journalists had to do their own research to find out.
In 2012, Congress passed the Biggert-Waters Flood Insurance Act, which, among other things, directed FEMA to monitor the expenses and profits of insurance companies participating in the NFIP. Four years later, FEMA has not promulgated the necessary rules to enforce this provision.
“It is shameful that private insurance companies have profited from Sandy while failing to meet their basic obligations under the NFIP. It is inexcusable that FEMA has failed to provide proper oversight of those entities - especially when Congress has already empowered and required the agency to do so,” said Pallone. “FEMA has a responsibility to ensure that policy holders are treated fairly and charged a fair market price for the service they purchase, and it better get to work.”
“As homeowners struggle to rebuild their lives in the wake of Superstorm Sandy and other catastrophic storms, it’s imperative that the National Flood Insurance Program conduct proper oversight of private insurance companies that participate in the program,” said Waters, Ranking Member of the House Financial Services Committee. “We are calling on FEMA to act swiftly and ensure it is not inappropriately compensating companies at the expense of policyholders.”
In May, Pallone led a bipartisan letter from members of the New Jersey Congressional delegation to Administrator Fugate of the Federal Emergency Management Agency (FEMA) requesting that it take swift action on behalf of those who have suffered from documented, widespread fraud perpetrated by private insurance companies in the aftermath of Superstorm Sandy. The lawmakers asked for an explanation of why it is taking FEMA so long to process the insurance claims of these victims and to detail the steps FEMA is taking to swiftly rectify the situation.
After that letter was sent, Pallone and Congressman Bill Pascrell (NJ-09) met with Roy Wright, Deputy Associate Administrator for Insurance and Mitigation at the Federal Emergency Management Agency (FEMA), to demand that FEMA take swift action to process claims for victims of Hurricane Sandy. At the meeting, Wright stated that FEMA would have the unprocessed claims finished by the end of the summer.
Text of the letter can be found below:
W. Craig Fugate
Federal Emergency Management Agency (FEMA)
U.S. Department of Homeland Security
500 C Street SW
Washington, DC 20472
Dear Administrator Fugate:
We write to request that FEMA fulfill its legal obligation to provide oversight of the private insurance companies that participate in the National Flood Insurance Program (NFIP).
In the wake of Superstorm Sandy and other recent disasters, FEMA and NFIP have faced accusations of incompetence and fraud. During the recently aired Frontline documentary “The Business of Disaster,” which examined issues with flood insurance after Superstorm Sandy, Roy Wright, Deputy Associate Administrator for Insurance and Mitigation, was asked if he knew how much profit private insurance companies servicing NFIP were making. He responded, “I’ve never looked at the book of business to understand their profits.”
Frontline did look at those numbers, and it concluded that private insurers made more than $400 million in profits from FEMA in the year that Hurricane Sandy devastated the Atlantic coast – its highest profit in the 4-year period from 2011 to 2014. At the same time, many of those insurers were underpaying or outright denying legitimate flood insurance claims.
FEMA’s lack of awareness is both unacceptable and easily fixable. The agency has already been directed by Congress to review the finances of these companies. An important provision of the Biggert-Waters Flood Insurance Act of 2012 required FEMA to issue regulations to ensure that federal “reimbursements track the actual expenses [of private flood insurance companies] as closely as possible.” The law required FEMA to issue a rule within a year of the law’s enactment to establish a process to collect the necessary data from these companies. Almost four years later, FEMA has not issued the rule.
We request that FEMA move as expeditiously as possible to formulate and issue the rule, and that you provide us with an estimated timeline and periodic status updates as you work to meet this congressional mandate. Taking that step would help to restore accountability to the NFIP. We look forward your response.