Insurance reform may be needed in order for federal program to survive
Flood insurance continues to be a concerning issue in the U.S., where flood coverage is primarily provided through the National Flood Insurance Program, which is managed by the Federal Emergency Management Agency (FEMA). The federal program has become crippled by debt following powerful hurricanes that caused widespread flooding in some parts of the country. This debt has been augmented by the impact of Hurricane Sandy. Those living in the states hit hardest by this powerful disaster are still trying to recover.
Senator Menendez proposes reforms for federal program
Senator Robert Menendez has been pushing for flood insurance reforms this year. The Senator has called upon the head of FEMA to increase penalties for insurers that underpay flood claims. FEMA is also being pressured to reopen more than 300 claims associated with Hurricane Sandy. Many of these claims were dismissed due to technicalities in flood insurance policies. The Senator is also pushing for the establishment of an organization that will help homeowners with their flood claims, making the claims process easier.
Insurers do not face penalties for underpaying flood claims
Senator Menendez suggests that these reforms could go a long way in solving the problems of the National Flood Insurance Program. The program has been harshly criticized by homeowners for underpaying insurance claims. This is only one side of a problematic coin, however. The private insurance companies that are providing coverage through the federal program are liable for the money they overpay on claims, but they do not face penalties for underpaying claims to homeowners.
Federal program may be too broken to fix
Fixing the National Flood Insurance Program is not an easy task. Whether or not the reforms proposed by Senator Menendez will be successful is difficult to say for certain. The federal program’s financial problems may prove to be too much to manage, which could lead federal lawmakers to shut down the program at some point in the future. Some states are taking steps to distance themselves from the federal program, opening up their flood insurance market directly to insurers.