U.S. Sens. Paul S. Sarbanes and Barbara A. Mikulski of Maryland and Sen. Elizabeth Dole of North Carolina, speaking at a Senate committee hearing on reauthorization of the National Flood Insurance Program, said thousands of Isabel victims have found their flood settlements are far too low to pay for repairs to their homes.
Sarbanes and Mikulski said their investigations have found possible problems with the price guidelines and software that adjusters used in settling Isabel claims. They also questioned the compensation system for adjusters, which some say indirectly creates pressure for homeowners to settle for less than they deserve. They added that consumers, agents and adjusters were misinformed about flood insurance policies.
They praised the head of the flood program, Anthony S. Lowe, for undertaking reforms to prevent problems after future catastrophes. But the two Maryland senators said he needs to do more for Isabel victims than examine the 80 claims given to him two weeks ago by the Maryland Insurance Administration.
"I don't think the number of people with problems in Maryland is 80. I think it is very substantially in excess of that," Sarbanes told Lowe at the hearing. "It may mean extra work for you, but I think you should go back to the communities and say, 'We have an open door,' allow people to revisit you. A lot of people have never gone to the state insurance commissioner with their problems. You need to reach out."
Later, at a summit he organized for flood victims, regulators and insurance industry representatives in Virginia, Lowe said he plans to do just that. He said the 80 complaints his staff has been reviewing are only the starting point.
"I take that charge very seriously," he said.
Hundreds of Isabel victims in Maryland, Virginia and North Carolina are still living in trailers, and many have taken on tens of thousands of dollars in debt as they attempt to rebuild. Six months after the storm, the outcry from victims about the size of claims from the flood program has only intensified as they attempt to hire contractors and find their settlements to be far short of what they need.
Isabel victims from six states and Washington, D.C., have filed more than 25,000 claims, totaling more than $380 million, though Lowe said he expects the final total to top $450 million. Maryland accounts for 6,100 claims, totaling about $128 million.
"This wasn't Gucci waterfront," she said. "This was blue-collar waterfront. This was hardscrabble waterfront."
The summit, which continues today, is part of an effort to overhaul the flood insurance system, which Isabel and other events have shown to be flawed, Lowe said.
Isabel victims from Maryland felt pressured to settle and were given incorrect or conflicting information about their claims, he said, adding that the number of complaints from the state demands a review of the program "from top to bottom."
"There has been too much suffering for anybody to think comprehensive review is not needed," he said.
Mikulski offered four suggestions for improving the program: better education for consumers so they know what the program covers; more training for the private agents who sell flood policies; a more straightforward appeals process; and an improved payment system for adjusters.
Lowe has said he is working on tackling the first three issues, and he said yesterday that his staff is looking into the question of how adjusters are paid.
The adjusters who handle floods, typically independent contractors, are now forced to lay out thousands of dollars in travel, hotel and restaurant expenses but are paid only after victims sign off on their claims. The result, Mikulski and Sarbanes said, is that some adjusters put tremendous pressure on Isabel flood victims to sign what are known as "proof of loss" forms, sometimes implying they would get nothing if they did not settle.
"A criminal knows their right to appeal in court, but a flood insurance victim doesn't," Mikulski said. "We really need to get this straight."
Sarbanes called into question price guide handouts distributed by the flood insurance program in the wake of the storm and the data on which some adjusting software is based. The software relies on data designed to predict the costs of new construction.
Sarbanes said the data's publisher told his staff that his information is not intended for the more costly repair and restoration work needed after a flood and would result in settlement offers 25 percent to 50 percent too low.
A notation on the price guide handouts indicates that they are based on the same data. However, the data's publisher, Gary Moselle, told The Sun recently that the price guide handouts are not derived from any information he publishes.
Lowe said after the hearing that he is investigating the software issues. He said experienced flood adjusters are able to write claims effectively, but flood insurance is so specialized that there are not enough to handle major storms such as Isabel.
He said he wants to make the system as simple as possible so that everyone involved is able to understand the flood policy and claims are settled uniformly and fairly.
The hearing yesterday in Washington was attended by about a half-dozen Isabel victims. At least another half-dozen attended the summit in Falls Church, Va.