Insurance Transparency Project

Insnerds,

Now up on the site is a little-noticed letter that Gene Taylor, D-Miss., wrote on Jan. 5 to Barney Frank, new head of the House Financial Services Committee, requesting “a detailed investigation of insurance industry practices in the aftermath of Hurricane Katrina”:

Taylor’s letter to Frank

The six-page letter became more relevant yesterday when Frank and Mel Watt, D-NC, incoming head of the Subcommittee on Oversight and Investigations, issued a statement agreeing to probes.

“We have received from our Congressional colleagues who represent the Gulf Coast serious allegations of a failure in the insurance system to serve the purpose for which it was intended,” said Reps. Frank and Watt. “We believe these allegations deserve appropriate attention and our Committee will be looking into these charges.”

Anyone with more than a passing interest in the subject of Katrina and/or insurance will probably want to look over the Taylor letter, which provides a road map to the hearings. It asks to focus on two alleged problems:

1. “The denial of thousands of Katrina wind claims wherever insurers could blame flooding.”

2. “Excessive premium increases, market withdrawal, and other actions to force states to make concessions or to assume more coastal risk.”

The letter includes data (! which War Eagle loves more than mice) showing that government-run insurers, the National Flood Insurance Program and the Wind Pool, paid substantially more on average than private insurers. In coastal Hancock County, for instance, the flood program paid an average of $130,000 per policy, the Wind Pool $46,000 and private insurers $25,000. He also notes wind claims were paid in full inland, but denied on the coast, even though winds came hours before water. Taylor alleges insurers, who administer both flood and their own policies, have a “clear” conflict of interest in assigning blame to water, which the government pays, rather than wind, which they themselves must pay. He also reports that an NFIP official told him that “oversight of insurance adjustment is a state regulatory function, and therefore outside FEMA and NFIP authority.”

War Eagle comment: Dat’s weedickerus.

ITP adds: the NFIP since the early 1980s has been overseen by Computer Sciences Corp., an El Segundo, Calif., contractor and important vendor to the insurance industry.

Taylor goes on:

“State Farm has used Haag Engineering (based in Houston) and adjusters from E.A. Renfro (Birmingham) to justify denials of wind claims. Both companies have a history of questionable actions, including a 2006 decision against State Farm’s denial of 1999 tornado claims in Oklahoma. The Oklahoma jury found that State Farm acted with malice and recklessly disregarded its duty to act fairly and in good faith by employing” Haag and Renfro.

It goes on to note Renfro whistleblowers’ allegations that they were instructed to pay NFIP claims fast and “to refuse to acknowledge” any evidence of wind damage.

And there’s this explosive allegation:

“I have long suspected that State Farm, Allstate, Nationwide, and a few other insurers agreed to aggressively denied Katrina wind claims as they had never done before. One company would not have been able to get away with blanket denials if the others had been paying claims. The manipulated assessments by firms such as Haag Engineering and E.A. Renfro suggest a much broader conspiracy to default consumers and taxpayers.”

At this point, insurers deserve a chance to respond. If ITP were a newspaper, the response would already be here. If you want to know why it’s not, I need to tell you something about this blog: It isn’t important enough to bother people with, yet. However, I will willingly post and highlight any insurer reply, on the record or not.

ITP believes the Taylor letter has news value, no matter what side of the debate you are on. And not to be coy: ITP likes investigations because they produce data which helps transparency.