Insurers have taken a beating in Congress and the press for allegedly dumping claims involving properties damaged in Hurricane Katrina on the National Flood Insurance Program, which in fact might have been wind-related and should have been paid by private homeowners carriers. While two federal investigations failed to come up with any evidence supporting such charges, one insurer testifying on Capitol Hill offered a solution that might make the point moot in future storms. I am curious what you make of it.
Indeed, as reported by our own Matt Brady (click here for the full story), Fidelity National Insurance Company President and CEO Mark Davey said his company cannot possibly be pegged with what Rep. Gene Taylor, R-Miss., has characterized as a natural conflict of interest in having a homeowners insurer that also writes for the NFIP send an adjuster to assess wind and water claims on the same property.
Under such circumstances, it has been suggested, an adjuster loyal to their employer–the insurer–might be tempted or even coerced to skew their report to indicate that flood waters were entirely responsible for a loss, no matter what evidence of wind damage might be evident, thereby sticking Uncle Sam with the entire bill.
Mr. Davey, who testified on behalf of the Property and Casualty Insurers Association of America, noted that Fidelity runs its flood insurance and homeowners insurance as two entirely separate businesses, Mr. Brady reported.
Its two separate claims files, with two separate adjusters and no communication between them, he said, adding that the homeowners business is run out of Fidelitys Omaha office, while flood insurance operations are based in Florida.
That sounds simple enough, although it would certainly raise the costs involved. Still, the added price would be worth every penny if it restored integrity to the system and removed the black cloud over the heads of insurers entrusted with administering NFIP claims.
What if the two adjusters disagree over the cause of loss in a flood-versus-wind scenario? That would have to be adjudicated somehow, but at least the carrier itself would be less open to charges of manipulation or fraud.
Of course, the feds could also clear up this conflict by selling flood insurance directly, and hiring their own adjusters to settle the claims. But that would definitely raise costs, and who knows if Uncle Sam would handle claims any better than private adjusters? In addition, the possibility of conflicting flood-versus-wind assessments would remain.
At first blush, the notion of splitting an insurer's NFIP and private homeowners insurance adjusters makes a lot of sense. Is there something I am missing here? It almost sounds too easy. Why don't more carriers handle such claims this way?
What do you folks make of all this?
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
