The Flood Insurance Reimbursement Standards Transparency (FIRST) Cap Profits Act was unveiled by Congressman Frank Pallone Jr. (D-Monmouth, Middlesex) during a press conference that was held in Highlands on Oct. 19.
That legislation would require increased oversight and transparency of the National Flood Insurance Program (NFIP) by the Federal Emergency Management Agency (FEMA) and cap the profits of private companies providing flood insurance at 10 percent.
A 2009 Government Accountability Office report found that profits for flood insurers averaged 16.5 percent, while a more recent study found profits closer to 30 percent. In the wake of superstorm Sandy and other recent disasters, FEMA and NFIP have faced accusations of incompetence and fraud, which has led to thousands of New Jersey families being overcharged or without the payments they rightly deserve.
“It is shameful that private insurance companies have profited from Sandy while failing to meet their basic obligations under the NFIP. It is inexcusable that FEMA has failed to provide proper oversight of those entities — especially when Congress has already empowered and required the agency to do so,” said Pallone. “FEMA has a responsibility to ensure that policyholders are treated fairly and charged a fair market price for the service they purchase, and my bill will take an important step in that direction. I will also be using the reauthorization of the NFIP next year as an opportunity to push for more accountability from FEMA and insurance companies.”
Earlier this year, Frontline’s documentary, “The Business of Disaster,” examined issues with flood insurance after superstorm Sandy. Frontline did its own analysis and concluded that private insurers made more than $400 million in profits from FEMA in the year that superstorm Sandy devastated the Atlantic coast — the highest profit in the four-year period from 2011 to 2014. Between 2011 and 2014, industry-wide profits averaged $325 million a year — nearly 30 percent of the revenues the companies receive from FEMA. At the same time, many of those insurers were underpaying or outright denying legitimate flood insurance claims.
The FIRST Cap Profits Act would rectify this problem by forcing FEMA to review the finances of these companies, something it was required to do by the Biggert-Waters Flood Insurance Act of 2012. Additionally, by capping profits at 10 percent, the legislation would ensure that taxpayer dollars are going towards policyholders, while leaving room for these companies to make a profit for administering a program they bear no risk in.
Pallone has been a leader in demanding transparency and swift action on behalf of those who have suffered from inefficiencies and documented, widespread fraud perpetrated by private insurance companies in the aftermath of superstorm Sandy. This year he pushed FEMA to complete delayed claims in the review process from Sandy. FEMA has now completed 99 percent of the claims, which have so far resulted in $111 million more in payments coming to policyholders.