GAO Recommends Insurers Provide More Data

Washington – A recent report by the Government Accountability Office (GAO) suggests that insurers should make a broader swath of claims data available to Federal Emergency Management Agency (FEMA) regulators. The suggestion arises in the wake of questions prompted by Hurricane Katrina concerning the responsibility for damages and later allegations that insurers misrepresented wind damage in claims to the National Flood Insurance Program (NFIP) in order to limit their financial losses after the storm.

The report seemingly buttresses the allegations and states that in instances where the same company is responsible for determining damages and losses to itself and to NFIP, an inherent conflict of interest is created.

“GAO recommends granting FEMA authority to obtain available write-your-own (WYO) authority to obtain available WYO for properties subjected to both high winds and flooding and WYO insurers’ guidance to adjusters for making such damage determinations,” the report states. It also adds that because NFIP does not systematically collect and analyze both wind and flood damage claims data, it limits FEMA’s ability to assess the accuracy of flood payments on hurricane-damaged properties.

However, members of the insurance industry were quick to point out that the report contains no evidence of wrongdoing by insurers. “This report has no mention of any evidence that the insurance industry engaged in a pattern of improperly attributing wind damage to water, which would have forced American taxpayers to foot the bill through the National Flood Insurance Program,” says Carl Parks, SVP for government affairs for the National Association of Mutual Insurance Companies. “While the report does cite the need for reforms to the National Flood Insurance Program, it does not fault insurance companies for their actions following Hurricane Katrina. What's needed now is a coming together of all stakeholders–insurers, consumers, policymakers and politicians–to develop strategies to prevent and mitigate future property losses.

Sources: GAO, NAMIC