Better grasp of flood insurance urged

NFIP head says agency can do more to educate

March 06, 2004|By Andrew A. Green | Andrew A. Green,SUN STAFF

The director of the National Flood Insurance Program acknowledged yesterday that his office should do more to educate agents and consumers about flood policies to prevent problems like those complained about by Tropical Storm Isabel victims.

But the director, Anthony S. Lowe, defended his agency's response to the storm, saying that the volume of complaints is small compared with the 24,000 claims it has processed since the storm.

"Not to lessen the impact of the need to inform consumers and to process in a timely way, in a fair way, their claims, but I think in terms of the big picture, I think we've got to keep it in perspective," Lowe said.

Lowe was responding yesterday to a report released this week by Maryland Insurance Commissioner Alfred W. Redmer Jr., and another issued last month by Redmer's predecessor, Steven B. Larsen. Those reports detail problems that Isabel victims in Maryland have had in settling flood insurance claims.

Their reports call for more education and training for the private insurance agents who sell flood insurance, and for easy-to-understand materials and disclosures for consumers.

Ed Connor, chief of industry relations for the NFIP, said the agency offers extensive training programs for flood insurance agents and requires training for adjusters. The number of Marylanders' complaints about uninformed agents might have been so large because the state hasn't had a major flood in years, he said.

Many states include flood insurance questions in their licensure exam or require specialized training for agents who sell the policies. Lowe said the NFIP suggested during Larsen's tenure that Maryland should do so.

Larsen said yesterday that he doesn't recall that request.

Redmer's spokeswoman, Debbie Rosen McKerrow, said the commissioner has introduced a bill in the General Assembly to require that agents selling flood insurance take classes on the policy.

Lowe disputed some of Redmer's criticisms. For example, in his report Redmer said a flood insurance policy would allow the program to pay for materials that are the "functional equivalent" of those that were damaged. He gave the example of replacing granite countertops with Formica.

James Shortley, the NFIP's claims director, said that isn't so. However, he said, the policy is designed to prevent victims from profiting from their claims - say, getting paid for granite but installing Formica.

Shortley also objected to a criticism that Larsen and Redmer raised about the way claims are settled. Both wrote that the private companies that administer flood insurance sometimes held up victims' claims for structural damage because of disputes over contents coverage.

"This is not something we condone," Shortley said. "Nobody's told me the name of the adjuster who does that or the name of the company. If I had that information, I'd be on the phone to that company or that adjuster in a heartbeat to stop that practice."

Shortley said there is no regulation prohibiting the practice.

Lowe also sided with Redmer in saying that the insurance commissioner doesn't have the right to hold flood insurance carriers to the terms of Maryland's Unfair Claims Settlement Act. Larsen said in his report that Redmer should use that act to regulate the activities of companies selling flood insurance.

State Sen. Norman R. Stone Jr., a Dundalk Democrat, introduced a bill last month at the request of Baltimore County Executive James T. Smith Jr. to add flood insurance to the claims settlement act. A hearing on the bill is set for Tuesday.

Larsen said Lowe is probably right in stating that the vast majority of claims did not generate complaints. But he said his study, which was commissioned by Smith, found that those whose homes were most severely damaged often had great difficulty settling their claims and found the insurance companies' offers to be far short of what they need to rebuild.

"The important thing is that those folks have an avenue to get their complaints resolved," Larsen said. "When you're dealing with big money claims, you're not talking a dispute between $500 and $1,500 because a tree fell on your house. You're maybe talking about $50,000, or whether or not your house gets built."

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