Velazquez Bill Would Improve Flood Insurance Program

Washington, DC – Rep. Nydia M. Velázquez (D-NY) has authored legislation to improve the National Flood Insurance Program (NFIP), a government initiative that allows property owners to purchase insurance for protection against damage from floods. In addition to reauthorizing NFIP for ten years, Velázquez's bill would make a number of necessary reforms, correcting problems in the program that became apparent after Hurricane Sandy.

"After Sandy, we heard countless stories from homeowners who saw their claims denied or significantly delayed due to systemic problems in the flood insurance program," Velázquez said. "My bill would address shortcomings in this program and make it work better for policyholders."

Velázquez's legislation would make significant reforms to 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 initiative," 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 had engineering firms alter 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, institute protections for whistle blowers and stiffen penalties for falsification of engineering reports used to adjust claim payouts.

"Unfortunately, as our climate changes, I expect we will have more catastrophic weather events in the years to come," Velázquez noted. "Homeowners and property owners living in flood prone areas need to have a functional flood insurance policy with the assurance they will be treated fairly in the event of property damage."

Velázquez is the third most senior Democrat on the House Financial Services Committee. She introduced her legislation the day before that Committee's Subcommittee held its first hearing on reauthorization of the NFIP. The program is slated to expire at the end of September and Congress must pass legislation reauthorizing it before then.

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