Insurance Transparency Project

Insurance Fans,I have to question the federal government today.
This story, by the Times-Picayune’s Washington bureau, says the inspector general of the Department of Homeland Security can’t tell whether insurers adminstering the flood program on behalf of the federal government blamed flood where no flood occured, shifting the costs from themselves to taxpayers.

WASHINGTON — The federal flood insurance program lacks a system to coordinate benefits with private policies, and too often relies on insurance companies to determine the breakdown of damages between wind and water, leading to potential conflicts of interest, two federal officials testified Tuesday.

But neither Matt Jadacki, deputy inspector general for the Department of Homeland Security, or Orice Williams, director of financial markets and community investment for the U.S. Government Accountability Office, could say whether insurance companies improperly shifted Katrina claims to the federal flood insurance program, in part, because they said federal administrators don’t keep wind damage data in their files.

And look here: the IG can’t get documents from FEMA, the NFIP’s parent.

Jadacki said his agency has had trouble getting information from the Federal Emergency Management Agency, which oversees the flood insurance program, and from private insurers, and is now subpoenaing the documents.

The federal government is subpoenaing itself? What?

This no joke. What the IG is looking at is allegations of financial fraud. That’s a crime, I-Fans. We don’t know if the allegations are true, but that’s what’s on the table here.

And listen, I say we don’t know if the allegations are true, but that may be a case of excessive generosity on my part. In fact, we do know that:

In Broussard, a federal judge and jury in Gulfport found State Farm did exactly the kind of illegal cost shifting, while a federal judge and jury in Weiss found the same thing about Allstate. Eight whistleblowers from a third-party adjusting firm allege that a unit of American National Property & Casualty Insurance Co. assigned $95,000 in flood damage to property that never flooded at all. And public adjusters are saying that insurers are charging the flood program 300% more for sheetrock and other materials in the same house, depending on whether wind or water caused the damage.

If the IG wanted to find evidence of, he might, in seriousness, go to nola.com and search under “Mowbray.” Another source is documentary evidence posted on Rep. Gene Taylor’s site, which includes:

1. Emails from Forensic Analysis & Engineering engineers saying that State Farm fired their firm for assigning wind damage to wind.

2. An affidavit by Cori Rigsby & Kerri Rigsby in McFarland v. State Farm in which the Rigsby sisters described the actions of State Farm officials to manipulate Katrina claims in Mississippi.

3. Engineering reports in cases known as McIntosh, Mullin, Nguyen, Beckham, Gaspard, Kuntzman and others showing engineering reports citing wind damage being scrapped and others citing water damage shown to homeowners.

Point is, this data is publicly available. It is not clear why the IG doesn’t read it. Here’s another example of the IG’s strange passivity:

Jadacki said he asked FEMA officials to respond to the “newspaper stories,” and is awaiting a response. He expressed hope that a subpoena of wind damage data for properties damaged or destroyed by Hurricanes Katrina or Rita will help his office determine if costs were improperly shifted to the federal flood insurance program.

As Taylor himself said, if the newspaper can find it, the IG can. Just go to the courthouse, and look up the case. Make copies. Go back to the office. Write your report. I know you can afford the copying costs. The federal government is paying $3 million for this study.
Is ITP missing something? Get the data. Otherwise, there is nothing but the usual insurance muddle and nothing gets done.

Rep. Gary Miller, R-Calif., said it’s very important that the public and members of Congress understand that the allegations are serious but not yet proven.

“If the National Flood Insurance (Program) paid more than it should have after the 2005 hurricanes because insurance companies pushed wind losses to the flood program rather than paying for them under homeowners’ policies, then we must hold those companies accountable,” Miller said. “But let me just say that there is a difference between the potential for wrongdoing and a finding of actual wrongdoing.”

He’s right. Go find actual wrongdoing. It’s lying right there on the street.