Panel Approves Velazquez Flood Insurance Bill

Washington, DC – Legislation authored by Rep. Nydia M. Velázquez (D-NY) would improve the National Flood Insurance Program (NFIP), reducing fraud and ensuring policyholders are able to obtain the claims they are owed after floods. Her bill, H.R. 2875, would make a number of necessary reforms, correcting problems in the program that became apparent after Hurricane Sandy. The measure was approved today by the House Financial Services Committee.

"After Sandy, we heard from homeowners in New York City and up and down the East Coast who saw their claims denied, delayed or underpaid due to problems in the flood insurance program," Velázquez said. "This bipartisan legislation would address these shortcomings and protect policyholders from fraud and abuse."

Velázquez's legislation would reform the Write Your Own ("WYO") component in the NFIP. The WYO program is an arrangement between the Federal Emergency Management Agency (FEMA) and the private insurance industry, which allows participating property and casualty insurance companies to write and service FEMA's Standard Flood Insurance Policy ("SFIP") in their own names. As of 2015, there were 79 companies participating in the WYO program and handling the majority of flood insurance policies. In addition to the WYO program, FEMA also administers a small number of policies through the NFIP's Direct program.

"Multiple studies and investigations have found that FEMA hasn't conducted the appropriate oversight over the Write Your Own Program," Velázquez noted. "Unfortunately, some bad actors participating in this program have gamed the system to avoid paying policyholders' claims after flood disasters."

As of 2015, FEMA was seeking to settle roughly 1,800 lawsuits filed by homeowners claiming they were underpaid on flood insurance claims after Sandy. According to advocates and others, private insurers altered reports to reduce the amount and number of claims the insurance companies paid out. Among other reforms, Velázquez's legislation would improve disclosure and transparency for policyholders so they have a better sense of what is covered under NFIP policies, enhance penalties for fraudulent statement related to climate adjustments, and provide FEMA with additional authorities and responsibilities for overseeing litigation conducted by WYOs.

It would also initiate a pilot program to authorize WYOs to inspect pre-existing structural conditions of insured and pre-insured properties that could result in a denial of a flood insurance claim.

"When disasters strike and homeowners find their property flooded, the last thing they need is to encounter bureaucratic resistance recouping their losses from an insurance company," Velázquez added. "As our climate changes, unfortunately, we'll likely see future catastrophic weather events, making it all the more important that the federal government's flood initiative functions efficiently and fairly."

Velázquez is the third most senior Democrat on the House Financial Services Committee. The Committee approved her bill unanimously by a bipartisan vote of 58 to 0. The measure must now be considered by the full U.S. House of Representatives.

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