WASHINGTON – The Federal Emergency Management Agency said Thursday it will conduct a broad review of the 25,000 flood-insurance claims from Hurricane Isabel in the face of complaints from homeowners and lawmakers.
Federal Insurance Administrator Anthony S. Lowe made the statement to a Senate subcommittee, conceding that some companies and agents gave bad advice, customer service was poorly coordinated and some people did not understand provisions of their policies.
“It’s not supposed to work this way,” said Lowe, who promised that changes to the National Flood Insurance Program are on the way.
Lowe’s comments came in response to questioning by Maryland Democratic Sens. Barbara Mikulski and Paul Sarbanes, who said constituents were offered “unfair” settlements that left them without enough money to rebuild their homes to pre-flood levels.
“You should go back and review their claims and determine whether they were based on inaccurate . . . price guidelines or software that does not correspond with the real prices in terms of the costs of repairs,” Sarbanes said during the hearing by the Economic Policy Subcommittee of the Senate Banking, Housing and Urban Affairs Committee.
The federal government has processed about 24,000 Isabel-related flood insurance claims from Maryland, Delaware, Virginia, the Carolinas and Washington, D.C., with another 1,000 claims pending. It has paid $385 million for flood losses in those jurisdictions, and the pending claims total another $65 million.
A FEMA review of 80 claims in Maryland found some that showed discrepancies between the estimates of insurance adjusters and rebuilding contractors. In those cases, some corrections will be made, Lowe said.
But Mikulski and Sarbanes said the problems were much broader than those 80 cases.
Mikulski said people were not told they had the right to appeal the settlements, were pressured to sign claims because there were deadlines coming and were given ambiguous answers when they questioned insurance agents.
“People are telling me they don’t understand what their flood insurance pays for. They didn’t know, for example, that the contents of their homes weren’t covered without a separate policy,” she said.
Miller’s Island resident Harry Wujek, for example, lost everything in the first floor of his home and got substantially less than the $80,000 he had insured the contents for. He is currently living in a rented apartment — with assistance from FEMA — and plans to ask for a supplemental claim as soon as his home is rebuilt.
“I lost $45,000 in contents,” said Wujek, who was not at the hearing. “They need to change some of their policies and laws too.”
Bernice Myers, another Miller’s Island resident hit by the hurricane, said she had insured her house for $183,000 but was told she could only get $57,000 “because of depreciation.” Since Isabel destroyed her home and three cars, she now lives in a house her husband used to rent out.
Under questioning by Sarbanes, Lowe said Thursday that all 25,000 claims will now be reviewed.
Lowe said FEMA will look at groups of claims for patterns, and then review claims one by one if it finds categories that are problematic. If legitimate claims were denied, or not fully compensated, the program would contact the clients — but he warned that the process could take up to six months.
Maryland had the most Isabel-related complaints, Lowe said. The Maryland Insurance Administration received informal complaints from 1,338 people, but said only 312 of those people filed formal complaints. Eighty-eight are still pending.
The hearing came as the Senate is studying reauthorization of the National Flood Insurance Program — already passed in the House. But critics said changes must be made before the program is reauthorized.
Mikulski said the program should plainly outline what the policies cover, better train agents who sell flood insurance, offer a clear way for homeowners to appeal awards or appraisals and make sure insurers pay the real cost of repairing or replacing damaged properties.
Other speakers also suggested that the program should be reauthorized for five years and that provisions should be added to deal with repetitive losses — properties affected by two or more floods in a 10-year period.
Myers, the Miller’s Island homeowner, was pleased to hear of the review — but still a little skeptical.
“That (the review) gives me great hope. My only concern is if it’s really going to happen,” she said.
-30- CNS 03-25-04