April 15, 2005
Witnesses: Flood insurance confusing
By Paul M. Krawzak
Copley News Service
WASHINGTON – A federal flood insurance program that has 35,000 policyholders in Ohio is rife with problems, leading to confusion, monetary loss and sometimes heartbreak among the insured, lawmakers were told during a hearing called by Rep. Bob Ney, R-St. Clairsville.
One witness, Georgette Stelyn of Seaford, Va., broke into sobs Thursday as she recounted her experience with the federally managed National Flood Insurance Program.
“They cheated me, they stalled my claim,” said Stelyn, adding that the stress broke up her marriage and left her a single mother.
Stelyn said when flooding triggered by Hurricane Isabel destroyed the family’s dwelling in September 2003, it was her understanding that their flood insurance would pay for a new house.
The settlement she received fell far short, leaving her thousands of dollars in debt and facing a non-payment lawsuit from her builder, she said.
Stelyn echoed the complaints of others at the hearing who said they were misled about what the insurance would cover. In many cases, insurance agents and adjustors do not understand the program either, others said.
Congress created the program in 1968 to fill a void in flood insurance coverage. The Federal Emergency Management Agency runs the program, but private agents sell the insurance.
While none of the horror stories at the hearing came from Ohio residents, the flood insurance program has generated confusion in Ohio, too.
Ney, chairman of a housing subcommittee that oversees the flood insurance program, said complaints from constituents have multiplied in recent years.
“I used to not hear a lot, but it’s grown by leaps and bounds,” he said.
Chad Berginnis, program supervisor in the flood plain management office at the Ohio Department of Natural Resources, said Ohio has largely avoided the confusion evident elsewhere.
But he added that several counties in northeastern Ohio, including Tuscarawas and Stark, have encountered more problems with the program as a result of having less experience with severe flooding in the past.
“The process was a little more chaotic up there,” he said, referring to insurance claims filed after the 2003 flooding. “Folks were not used to dealing with the claims process.”
More than 300 homeowners have flood insurance in unincorporated Tuscarawas County, New Philadelphia and Dover alone, according to FEMA. The number of policyholders in unincorporated Stark County, Canton and Massillon is 348, the agency said. Unincorporated Carroll County has 41 policyholders.
Several at the hearing offered suggestions for improving the program, such as improving insurance agent training, providing fuller disclosure and creating an independent appeals process.
Pervasive criticisms led Congress to pass a law reforming the program last year.
Since then, FEMA has failed to meet the law’s deadlines to require training for insurance agents, simplify policy descriptions and make other changes designed to improve the program, the General Accountability Office said in a report released Thursday.
Donald L. Griffin, spokesman for the Property Casualty Insurers Association of America, defended the flood insurance.
“Overall the program works very well,” Griffin said.
David I. Maurstad, acting director and federal insurance administrator at FEMA, said based on his experience, the program “meets or exceeds industry standards in terms of claims handling.”
Griffin, however, added that the program is “extremely complex” and could benefit from simplification.
Insurance agents often find it a challenge to determine the proper premium to charge for insurance, he said.
When there is a claim and the premium was insufficient to finance the amount of coverage that a homeowner had, Griffin said the policy is “reformed to provide the coverage that would have been purchased with the premium paid, often resulting in less coverage for the policyholder than they originally thought.”
Another witness at the hearing, fraud expert Steven J. Kanstoroom, accused insurance adjustors of engaging in criminal fraud.
When asked by a lawmaker to elaborate, he said, “Flat out wrongful denial of claim.”
Earlier, Ney drew applause from apparent flood victims in the audience when he pledged to review information that Kanstoroom has collected on the program.