Proposals for improving the federal flood insurance program do not address broader problems that led to settlement offers that are tens of thousands of dollars too low, according to insurance adjusters who handled Tropical Storm Isabel claims.
Federal Insurance Administrator Anthony S. Lowe, who is scheduled to testify today before a U.S. Senate panel, has said he is looking for ways to eliminate wide misunderstandings among agents, adjusters and consumers about what is covered under the National Flood Insurance Program and to improve the appeals process for those not satisfied with settlement offers.
But those who adjusted claims after Tropical Storm Isabel said slow payments for adjusters encourage them to work as quickly as possible and to err on the side of rejecting claims that might be disputed by the federal program.
"You've got somebody sitting ... miles away, not aware of the circumstances, not aware of anything going on, saying, `We're not going to pay,'" said Donald Foster, a public adjuster who represented Isabel victims in North Carolina. "You're just totally at their mercy, and, frankly, people are getting jerked around."
Six months after Isabel, hundreds of Marylanders have yet to return to homes destroyed by the storm. In waterfront communities in Baltimore and Anne Arundel counties and beyond, flood victims struggle with the flood insurance program to obtain the money to rebuild.
Flood insurance is under scrutiny this week. Lowe met Tuesday with Isabel victims in Annapolis, where he said he is forming a plan to improve the agency's performance in disasters. The Senate is scheduled to hold a hearing on the flood insurance program this morning, and Lowe is holding a summit today and tomorrow for regulators, flood victims and industry officials from the Mid-Atlantic.
As Isabel victims' complaints about flood insurance have intensified in recent weeks, the NFIP has become a hot topic among adjusters who handle catastrophes. A discussion about Isabel on a Web site devoted to the profession, www.catadjuster.org, has received more than 3,000 hits in the past two weeks.
In interviews with a dozen adjusters from Connecticut to Texas, those who handled claims from Isabel and other floods said adjusters should be compensated more quickly to keep those who are experienced from leaving the field.
Dave Onegard, an insurance examiner at the NFIP, said the agency is looking into complaints about adjuster payments. But he acknowledged that there are not enough good flood adjusters to handle major catastrophes and that inexperienced ones often do not know how to properly document flood claims, which can lead to delayed or incomplete reimbursements for victims.
"How do we deal with that? Training and co-adjusting and a lot of other things, but we're still working on it," he said. "I don't know if we have any great solutions yet."
Isabel victims have complained that adjusters pressured them to sign what are known as "proof-of-loss forms," which are summaries of damage and the cost to repair it, even though they believed the amount offered was insufficient.
NFIP officials have said adjusters and insurance companies have no incentive to push victims for low settlements. On the contrary, their fees are based on a percentage of the claims paid.
But in practice, adjusters say, that's not how it works. Catastrophe adjusters sign on with private adjusting firms after natural disasters. They fly or drive to the scene, check into a hotel and begin contacting the claimants they have been assigned, said Jim Flint, an adjuster with 30 years of experience who no longer handles flood claims.
In other kinds of catastrophes, where homeowners insurance or other private policies cover loss, adjusters are often paid within two weeks. But in flood claims they aren't paid until proof-of-loss forms are signed, a process that can take months, adjusters said.
"He can be out a thousand, fifteen hundred bucks the minute he's out the door. He's got to carry his hotel room; he's got to carry his food, his computer, supplies, paper, film. He can be out 2,000, 3,000 bucks before he sees his first claim," Flint said. "With NFIP claims, it can be 45 days before he gets his first paycheck."
That puts the adjuster under tremendous pressure to settle claims quickly, Flint said. If the adjuster is experienced and can handle the claims effectively, that's good. If not, it can spell trouble, he said.
Complicating the issue, said Ray Hall, an adjuster from Houston who has been handling flood claims for 20 years, is that the settlements adjusters propose are subject to review by the NFIP or its subcontractors. To avoid delays in getting paid because of denied claims, adjusters have an incentive to err on the side of caution about what is covered, he said.
When a major storm, such as Isabel, causes widespread flooding, the few adjusters who specialize in floods rush to the scene, but so do people who know relatively little about the ins and outs of flood insurance, said Robert W. Jackson, president of Florida-based Jackson Adjusting Co., which handles only flood claims. The standard flood policy is like no other in the insurance industry, and it has been modified over the years by interpretations that only flood specialists know well, Jackson said.
Jackson said, "If there's a problem with the adjusters, it's really the fly-by-nighters that come out during the big storms, and I'm not sure how you're going to get around that problem."