NJ congressman: Cap profits of insurance companies handling Sandy claims
LONG BRANCH — The National Flood Insurance Program would be subjected to increased oversight and transparency under legislation introduced this week by U.S. Rep. Frank Pallone Jr., D-N.J. 6th District.
The Flood Insurance Reimbursement Standards Transparency (FIRST) Cap Profits Act is in response to problems with flood insurance claims from Superstorm Sandy, which is approaching its four year anniversary this month.
Pallone's bill would require the Federal Emergency Management Agency to review the finances of insurance companies participating in NFIP, and cap their profits off the program at 10 percent.
"Their profits are rather extensive without any liability because FEMA basically reimburses any costs beyond their premiums," said Pallone.
Pallone said that FEMA was supposed to develop a methodology to examine the expenses of insurance companies pursuant to legislation that would have formed the Flood Insurance Act four years ago.
"But they haven't done it," Pallone said. "If they don't do it, then we're going to require that they take over all responsibility for the insurance companies."
Pallone noted the problems with the NFIP were mostly from the insurance companies themselves committing fraud with their engineering reports and a lack of oversight by FEMA.
"We have to try to get FEMA to do a better job of reviewing and oversight of the insurance companies and that is what this is designed to do," Pallone said.
Pallone is hoping the legislation can provide another level of protection and confidence in the program.
"It's just outrageous all the things that we have found that show that these insurance companies are making profits we figure may be 30-40 percent," said Pallone. He pointed out that the insurance companies don't have any responsibility.
"If the cost of what they pay out exceeds the premium, then the federal government picks up the tab. It's like a sweetheart deal. You basically have nothing to lose and you make a huge profit, so we're capping the profit at 10 percent, and we're putting in a methodology to find out exactly what their expenses are and what their costs are, so we would know when that 10 percent is reached," Pallone said.
If FEMA doesn't do it in a timely fashion, Pallone cautioned, "They won't pay out to the insurance companies, so we think that that provides some sort of incentive for everybody, including the insurance companies, to do the right thing. Otherwise they don't get paid."
Pallone said his bill would be introduced when legislators return into the lame duck session after the November election. However, Pallone noted the goal is to get it included in the NFIP program, which is due to expire and has to be reauthorized next year.
Contact reporter Dianne DeOliveira at Dianne.DeOliveira@townsquaremedia.com.
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