State insurance commissioner to urge flood program changes

Redmer will discuss Isabel victims' criticisms with U.S. lawmakers

March 04, 2004|By Andrew A. Green | Andrew A. Green,SUN STAFF

Maryland Insurance Commissioner Alfred W. Redmer Jr. is to meet today with the state's U.S. representatives and senators to argue for changes in the federal flood insurance program, which has faced widespread criticism from Tropical Storm Isabel victims.

With a U.S. Senate hearing on the National Flood Insurance Program set for next week, Redmer's office is also conducting a series of investigations into the way flood insurance claims were settled.

Redmer would not specify the changes he proposes, and he would not comment yesterday on details of the investigations, other than to say that they should yield preliminary results in the coming week. But one area of inquiry involves software that insurance adjusters used to produce estimates of repair costs, according to correspondence between Redmer and an insurance agent who handled Isabel claims.

William P. Griffin Jr., an Easton insurance agent who handled about 15 flood claims after Isabel, wrote to Redmer last month that the software that the adjusters were using to calculate losses is "inaccurate and unreasonable."

Redmer responded a week later, writing that he and his staff were "taking these concerns seriously and have started a formal investigation."

Hundreds of storm victims have complained to the Maryland Insurance Administration, local officials and victim advocates that the claims on "proof of loss" forms prepared by insurance adjusters, who are typically subcontractors for insurance companies, were far lower than contractors' estimates of the cost of repairs. Flood victims were required to sign those forms before receiving settlement checks.

Redmer has faced criticism in recent months from Baltimore County Executive James T. Smith Jr. and from Isabel victims, who have said he hasn't done enough to resolve flood insurance problems. Redmer has argued that federal law limits his ability to regulate flood insurance, but he said he is taking the complaints seriously.

"We have a number of investigations going into a number of different subjects, and if anything turns out that we believe is fraudulent or misrepresentation, those limited areas where we do have jurisdiction, then we'll be doing something," Redmer said. "At this point, we have not seen that."

State Sen. Sharon M. Grosfeld, a Montgomery County Democrat, said she arranged a meeting Feb. 9 with Redmer and a former constituent whose Talbot County home was destroyed in the flood. The man, who worked for years in fraud detection in the financial industry, had amassed a binder of documents showing what he described as problems with the way adjusters calculated flood losses, said Grosfeld.

Redmer called Grosfeld about a week later to say his office was investigating software being used by the carriers, she said.

Jim Shortley, claims director for the National Flood Insurance Program, said that after a flood, insurance companies are required to send adjusters to survey the damage to policyholders' property. The adjusters enter information about the size and type of dwelling into a computer program that calculates repair costs based on materials and labor prices standardized by ZIP code, Shortley said.

Shortley said storm victims have suggested to him that there was a conspiracy among the government, adjusters and insurance companies to keep claim levels low. He said that's not true and that if anything, adjusters and insurance carriers have an incentive to inflate damage estimates because the government pays them more for processing larger claims.

It's not surprising that some people have complained about the settlement offers, though, Shortley said.

"There are a lot of people who are not ever satisfied with what you want to give them or what the adjuster wants to pay," Shortley said.

Last week, Redmer met with flood victims in Essex to solicit suggestions on how the National Flood Insurance Program, which is overseen by the Federal Emergency Management Agency, could be improved.

Bernice Myer, an Isabel victims advocate who attended the meeting, said Redmer addressed many of the issues that were outlined in a report his predecessor, Steven B. Larsen, released last month. They included the need for more education for flood insurance agents and adjusters, and for policies to be written in simpler language, she said.

The flood insurance program, which requires periodic reauthorization by Congress, will be the subject of a Senate Subcommittee on Economic Policy hearing at 2:30 p.m. March 11.

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