Having called on the Federal Emergency Management Agency to hold hearings and reform its flood insurance program to prevent fraud, Senator Charles Schumer is now asking that it do away completely with the "write you own" insurance policies that private companies sell to homeowners.The "write your own" policies fall under the National Flood Insurance Program, administered by FEMA, and allow private insurance companies to write and service the policies on behalf of NFIP, leading to underpaid policy claims, as alleged by numerous homeowners affected by Hurricane Sandy.
Following a "60 Minutes" report on alleged fraud in flood insurance companies, FEMA officials have determined that fraud has occurred in the flood insurance program, in which engineers' reports that found damage to houses from Sandy were altered to show no or little damage, thus lowering payouts to homeowners.
Schumer proposes that instead of the existing WYO system, the federal government write and issue the policies directly to homeowners.
He wrote a letter to FEMA Administrator Craig Fugate, explaining that a profit-driven private insurance model has led companies to minimize payments to homeowners.
"NFIP already offers approximately 1 million flood insurance policies directly to policyholders," Schumer points out in the letter. "FEMA should, therefore, retire WYOs from the current flood insurance system and instead allow the NFIP to offer all flood insurance policies directly to the property owners."
The senator also points out that FEMA doesn't need congressional approval to make these changes.
"I believe that such an overhaul is warranted," Schumer wrote. "We know the current model is terribly flawed and there is evidence to believe that a new model will allow the NFIP program to function more effectively and efficiently going forward."
FEMA has already made some reforms to its flood insurance program and is continuing to investigate and make more changes