House panel turns critical eye to U.S. flood insurance program

April 15, 2005|By Tom Pelton | Tom Pelton,SUN STAFF

WASHINGTON - With about 40 Maryland victims of Tropical Storm Isabel applauding and some wiping away tears, members of Congress yesterday grilled federal officials about claims of "rip-offs" and "fraud" in the government's flood insurance program.

"I am sick and tired of consumers being exploited," Rep. Maxine Waters, a Democrat from California, told an insurance industry representative during a congressional hearing on flood insurance. "If Congress does not move very aggressively to better protect consumers, none of us should be sent back to Congress."

Central to the debate before the House Subcommittee on Housing and Community Opportunity was whether the 37-year-old National Flood Insurance Program should pay flood victims the full amount needed to rebuild their homes or just a portion of losses to help victims get back on their feet.

The director of the program and a representative of an insurance trade group testified that federal flood insurance was never intended to pay homeowners the full value of their homes, and that the problem is a few misinformed consumers. This was disputed by critics who said the program isn't living up to its promises.

David Maurstad, flood insurance administrator with the Department of Homeland Security, defended his agency's performance, telling the skeptical audience that the "vast majority" of the roughly 47,000 victims compensated in 2003 were satisfied.

"One of my goals is to make sure that claims are handled fairly and expeditiously, and in my experience we meet or exceed industry standards," Maurstad said.

The hearing attracted a busload of residents from Baltimore County. More than 120 families in Maryland spent a second winter in government trailers this year, still not compensated enough to rebuild after Tropical Storm Isabel in September 2003.

"We still have families that have not received settlements and are still living in trailers, and that is wrong," said Rep. C.A. Dutch Ruppersberger, a Democrat from Baltimore County who, while not a member of the subcommittee, participated in the hearing. "After [Tropical Storm] Isabel, there was a lot of confusion and misinformation, and thousands of Marylanders were shocked to discover that the coverage they purchased was inadequate."

Yesterday's event wasn't the first congressional hearing to address concerns about the federal flood insurance program. But it was meant as the first test of public opinion since the passage of the 2004 Flood Insurance Reform Act, which required more plain language in insurance policies, a better appeals process for unsatisfied victims and more training for insurance adjusters.

The chairman of the subcommittee, Robert W. Ney, an Ohio Republican, said he would read the reports submitted by Maryland Insurance Commissioner Alfred W. Redmer Jr. and others and consider whether more legislation is needed.

"When I read my insurance policy, I assume replacement means replacement, and we have to clarify that, because this is terrible," Ney said.

Many yesterday said last year's reforms didn't go far enough. Redmer testified about what he called a lack of training for flood insurance agents and adjusters, and a burdensome and complicated claims review process, among other problems.

Steven J. Kanstoroom, a Talbot County flood victim who has become an advocate for flood insurance reform, told the committee that insurance salespeople tell homebuyers that they will be fully covered if they pay annual rates on policies that list the full value of their homes.

But insurance adjusters with the same companies are trained to write checks for sometimes only half of that - often only the portions of the house below the high-water mark, no matter if the walls and ceilings above that had to be demolished because of mold or rot, Kanstoroom said.

Janice Vincent, a 56-year-old Isabel flood victim from Middle River who was among those who took the bus from Baltimore County to Capitol Hill, said in an interview outside the hearing room that she and many of her neighbors who lost their homes feel cheated.

"My husband refers to dealing with flood insurance as the disaster after the disaster," said Vincent, who said they were offered $88,000 for a ruined house insured for $310,000 through the flood insurance program. "It was more stressful than the flood itself. The whole process was degrading, humiliating and more than a full-time job."

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