The Federal Emergency Management Agency adopted a number of reforms Friday aimed at helping homeowners who say they are being shortchanged by insurance companies.
Homeowners and elected officials have complained that the taxpayer-funded National Flood Insurance Program gives an incentive to private insurance companies to lowball flood claims by penalizing for overpayments, not underpayments.
FEMA has vowed to create a task force to fix this.
Ben Rajotte, the director of the Disaster Relief Clinic at Touro Law Center, says by penalizing insurers for both underpaying and overpaying, it will end the incentive that leads homeowners to get a fraction of their home's value.
"The insurer going in there knows that if they actually underpay, there's going to be a penalty. Then, that is hopefully going to create an incentive to do this the right way," Rajotte said.
Last month, a federal judge found "gamesmanship" on the part of one insurance company to underpay claims. He ordered all New York insurance companies to turn over a trove of documents to Superstorm Sandy claimants. FEMA has ordered the same for New Jersey.
FEMA also created a new office aimed at helping flood victims navigate the bureaucracy of disputing a claim.
Rajotte calls this FEMA's "greatest reform" because he says it enables the federal government to step in and help homeowners whose only other recourse was to seek help from nonprofits or private attorneys.
“When you’re the policyholder, when you’re the homeowner, and you believe that you’ve been undervalued or you’ve been denied coverage, you’re really left on your own,” Rajotte said.
