A bipartisan group of 23 U.S. House members, led by Rep. Frank Pallone Jr., asked the Federal Emergency Management Agency Friday to increase its oversight of the private companies that handle flood insurance claims, such as those stemming from Hurricane Sandy.
The letter to FEMA Administrator W. Craig Fugate said the agency was four years overdue in issuing a rule allowing it to find out how much in profits the companies were making.
"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 (D-6th Dist.).
Also Friday, U.S. Sens. Robert Menendez and Cory Booker (D-N.J.) sent their own letter to Fugate asking him to overhaul the entire flood insurance program.
"While we acknowledge the Federal Emergency Management Agency has recently taken steps to address these issues we raised over two years ago, these actions are far too little and have come far too late," the senators wrote.
FEMA spokesman Rafael Lemaitre said the agency already is taking steps to address any problems.
"We expect the private insurance companies we partner with to share our values of putting survivors first," he said. "That's why, over the past year, we've added multiple layers of oversight over these insurance companies and have completely overhauled the program."
The government is involved in flood insurance because otherwise it would be too costly for private companies to write policies on their own. The companies are involved because they have the ability to market the insurance and the adjusters and other trained employees to handle claims.
Menendez and Booker asked FEMA to evaluate whether the government should continue to rely on private insurers, require the companies to provide all of the information they used when processing claims or handling appeals, and make it easier to resolve legal disputes between the companies and their policyholders.
Insurers paid out $8.3 billion in clams following Hurricane Sandy, according to FEMA.
What happened following Hurricane Sandy, however, was that some companies underpaid homeowners, in some cases adjusting engineering reports to disguise the cause of the damage. In response, FEMA reopened claims of Sandy homeowners, has paid out more than $58 million, and is expected to complete the remaining reviews by the end of the summer.
"FEMA's lack of awareness is both unacceptable and easily fixable," the lawmakers wrote. "We request that FEMA move as expeditiously as possible."
In addition to Pallone, the other New Jersey lawmakers signing the letter were Reps. Donald Norcross (D-1st Dist.), Frank LoBiondo (R-2nd Dist.), Albio Sires (D-8th Dist.), Bill Pascrell Jr. (D-9th Dist.), Donald Payne Jr. (D-10th Dist.) and Bonnie Watson Coleman (D-12th Dist.).
"We'll continue to work with members of Congress to make sure Americans have a way to financially protect themselves against flooding, the most common disaster we see," Lemaitre said.
Separately, FEMA's deputy associate administrator for insurance and mitigation, Roy Wright, told Rep. Chris Smith (R-4th Dist.) in response to his query that the agency was developing a new method for determining how much the insurers should be paid for writing and servicing flood insurance policies.
"We simply cannot afford to have another dollar misspent or misused at the expense of disaster victims and American taxpayers," Smith said Friday.