GAO: Flood insurers have 'inherent conflict of interest'

McClatchy Newspapers
1/30/2008 -

WASHINGTON — The Government Accountability Office issued a report Wednesday on the National Flood Insurance Program that concluded insurers have "an inherent conflict of interest" in determining flood damage that the federal program must pay and the wind damage covered by private companies.

"I applaud the GAO for confirming that insurance companies have an inherent conflict of interest when they are allowed to determine whether to assign damages to their own wind insurance policies or to the federal flood insurance policy claims," said Rep. Gene Taylor, D-Miss.

The GAO concluded that the program needs greater transparency and oversight of wind and flood damage decisions.

"The report reinforces my proposal to give homeowners the option to buy wind and flood coverage in the same policy." The House passed Taylor's provision last September but the bill is stalled in the Senate.

"I urge the Senate to pass this legislation in order to stabilize the insurance market in coastal states," Taylor said. "I strongly support GAO's recommendations that insurance companies be required to turn over their wind claims files so that FEMA can verify that the companies applied the same standards to the flood insurance claims as to their own wind claims."

©2008, The Santa Fe New Mexican and MediaSpan

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