A View From The Press Box

There are two other steps, besides auditing, that should be taken by Congress:

1. Eliminate some of the conflict-of-interest that Write Your Own insurers have by requiring insurers that serve as WYO companies to not place any requirements in private policies that would cause taxpayers to pay any part of a claim that should have been paid by the private policy, such as the egregious anti-concurrent-causation clause.

2. Emphasize the direct (non-WYO) program where people can buy flood insurance direct from the government. This program saves a lot of money for taxpayers, since no commission is paid and the cost to service policies by the contractor is substantially less than the WYO cost.

I propose that Congress offer direct flood insurance at a discount--say half of the savings, or about a 10-to-15 percent savings, and to give out the direct toll-free number in federal advertising.

Then the buyer would have an incentive to buy direct and the taxpayer would also see big savings.

Not only would the consumer save and the taxpayer save, the conflict of interest in claims settlement would be eliminated for those consumers buying direct.

What would be the difficulty with eliminating the WYO entirely? What if we mandated that the flood policy be adjusted by a different company than the one who writes the wind policy?

I am concerned that asking people to contact the feds to buy a policy will not work. This must be sold to people by showing them the need.

Perhaps we should employ agents of the NFIP to market this, and put them on a commission basis. They could be federal employees, but the incentive to sell would still be there. If this were the only product they could sell, there would be no conflict of interest.

Perhaps the commissions could be based upon percentage of community protected versus a flat commission every time a policy is sold. Maybe a combination of the two would work best.

I am in favor of getting this coverage in place and doing so at actuarily sound rates. The government could outsource the rating of these policies to ensure accuracy and adequacy.

Sam, your penultimate paragraph is the answer. Leave the program as it is and keep everyone aware that Uncle Sam isn't sleeping.

Some of your other observations or suggestions leave out the one word that is supposed to control this whole issue. That word is 'ethics.'

I have been a property claims adjuster for in excess of 40 years (both company and independent). I used to do NFIA and NFIP work, but choose not to now. I am licensed and bonded and have built a reputation as fair and knowlegable.

I WILL RISK NONE OF THOSE by improperly allocating damages to the wrong carrier. I know that my professional colleagues feel the same way.

You go on to advise that FEMA should have "greater authority to access detailed reports of how WYO insurers divide up wind and flood claims." FEMA is paying the bills, I am surprised that they do not have and exercise this right at this point.

Sam, I see you are getting in another little knock on the ACC Clause (and AS ALWAYS) Mr. Hunter continues his diatribe on that subject.

My feelings on the ACC Cause are well known. I challenge all to have an enlightened discussion of hurricane losses without ever once mentioning the ACC Clause (a red herring if ever there was one).

And finally, you mention having an independent adjusting force set up to handle such claims. Questions:

1.) Where are you going to find these folks? The number of qualified property adjusters is pretty thin.

2.) What are they going to do for a living during those periods when there are no catastrophes to keep them working?

SAM RESPONDS:
Actually, it was GAO that suggested FEMA be given more auditing authority, not I....Although I would not argue the point, since FEMA is technically the "client," and the insurer, the vendor.

As for adjusters, hey, with all the complaints about outsourcing, at least independent adjusters is one field that cannot be off-shored to some other country. You need boots on the ground to do this work.

What would they do when there are no storms? What do all the other independent adjusters do? Adjust other types of claims, right?

As for ACC, it remains a very confusing clause that ends up undermining the industry's credibility for honesty and integrity, in my humble opinion. There must be a better way to resolve such disputes.

JAMES HAS THE LAST WORD:
As to my question regarding, "what would they do for a living between cats?"

You suggest that they do what other Independents do--adjust other types of claims. That means they work for other carriers. There goes the appearance of being an "independent adjusting force."

Therein lies the problem with having a 'dedicated' NFIP adjusting force.

As to our differing opinions on the ACC, I enjoy our repartee on the subject. Unfortunately, I cannot get comfortable with Mr. Hunter's position, which I believe he doesn't even really believe himself.

I am saddened to see that it's portratyed as general belief that there has been substantial abuse in this area. I did some hurricane CAT adjusting in my day and felt that my colleagues and I were fully professional.

When the policyholder and his contractor look at our estimates, it becomes fairly obvious what is flood vs. wind. Plus damages are documented better than ever by digital photos.

Where are the investigations to back up these contentions. How many have been indicted?

This dismal view that claims personnel must lack ethical and moral values to some global extent plays right into Robert Hunter's hand, he who will always believe the worst about the insurance industry.

Bravo Bill Brauer!

I could not have said it better myself!

I remember taking insurance courses regarding claims-made vs occurrence forms, Y2K scenarios, and the Single Adjuster Program, among many others.

Claims-made forms are still not the norm like we were frightened into believing. 1999 turned into 2000, which turned into 2001 and the world kept spinning with no catastophes. The SAP was presented as the solution to the wind vs water issues. What's next?

ETHICS is the answer. Wouldn't the world, and the insurance industry, be wonderful if we all acted ethically-- including our insureds and their lawyers?

It seems to me that the problem really stems from the fundamental coverage structure that the NFIP system sets up, under which flood damage and wind damage get paid from from two different pots.

Inevitably, that has to result in those disputes about whether or not the wind blew the house down before the flood water got there, or vice versa.

Having the decision made by an independent adjuster doesn't eliminate that basic conflict. That conflict automatically exists as long as wind damage comes out of one party's pocket and flood damage comes out of another party's pocket.

Regardless of how ethical, impartial and professional that adjuster is, no one is ever going to be willing to automatically accept an adjuster's opinion as final and unchallengeable, and there's always going to be room to disagree and argue about how the loss cost should be allocated.

I would suggest that what's really needed is a system under which one party--either a private insurer or the federal program--simply covers hurricane damage.

Sam, the comments generated by you and your readers are significant, but I think the key ingredient is missing.

The "inherent conflict of interest" is real, and will be until Congress removes the claims handling process from the WYO carriers.

Does NFIP need their own selling agents? No, selling flood insurance is not the issue. The system is in place, the existing agents need the income, and we do not want a federal bureacracy selling flood insurance.

Does NFIP need their own adjusters? No, and for the same reason. All flood claims should be assigned to independent companies with trained flood adjusters.

I have handled flood claims for WYO companies for over 12 years; in the earlier years, the WYO companies didn't know how to handle flood, and the claims process was left to the discretion of the independent firms.

A few years ago, carriers wanted more control over the process and the Single Adjuster Program became mandatory. Obviously, WYO companies do have a conflict of interest when they control the claims process to this extent.

I disagree with James' comment that the adjusting force would lose the appearance of independent status if they also worked for the insurance industry. I have worked for multiple companies over the past two decades. It doesn't matter if I wear a WYO company logo, or an NFIP logo; I am required to follow the bidding of my employer.

I agree with his comment that ethics will control the issue. If Congress disembowels the single adjuster program and removes the WYO carriers from handling flood claims, ethics WILL return to the profession.