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Report Finds No Incentives to Underpay Flood Claims

Results of a just-released investigation by Senate Banking Committee Republican staff downplays concerns that structural problems in the National Flood Insurance Program caused victims of Hurricane Sandy to be shortchanged by outside insurance carriers and engineers...
June 25, 2015

Results of a just-released investigation by Senate Banking Committee Republican staff downplays concerns that structural problems in the National Flood Insurance Program (NFIP) caused victims of Hurricane Sandy to be shortchanged by outside insurance carriers and engineers. The report says despite widespread concern, it does not appear that systematic incentives exist for any participant in the program to underpay on claims. Nor does there presently exist evidence of any such pattern of underpayment.

The committee began the investigation because of concerns that systemic flaws led to homeowners being underpaid in the wake of Hurricane Sandy. "We found no persuasive evidence to support the existence either of any general incentive to under pay policyholders or of any practice of doing so," the committee said in the report summary.

Sen. Charles E. Schumer (D-N.Y.) has urged FEMA to scrap the decades-old Write Your-Own (WYO) insurance model from the NFIP and "move forward to overhaul the process entirely." In a letter to the Federal Emergency Management Agency (FEMA), Schumer said "profit-driven motivations and incentives" are "not commensurate" with a federal program designed to provide fair payments to those that suffer losses. He said the NFIP should offer all flood insurance policies directly to property owners.

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