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GAO Report Underscores Waters’ Criticism of FEMA’s Compensation Methodology

Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, issued the following statement in response to a report published today by the U.S. Government Accountability Office (GAO) discussing the compensation paid to Write-Your-Own (WYO) companies that administer to the National Flood Insurance Program (NFIP). In 2014, Ranking Member Waters called on the GAO to study federal payments to WYO insurers and how they relate to actual expenses incurred by those insurers.

Ranking Member Waters released the following statement:

“As expected, the recent GAO report substantiates my long-standing claim that The Federal Emergency Management Agency’s (FEMA) compensation practices are inadequate. FEMA has yet to comply with the requirements contained in the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act) that would have finally required FEMA to base its compensation to the WYO’s on their actual expenses.

“In the wake of Superstorm Sandy and numerous findings of claims adjustment fraud on the part of private companies, it is more important than ever that FEMA has a clear understanding of the costs and payments of WYOs and other vendors that service NFIP policies.

“It is extremely disconcerting that FEMA does not collect sufficient data to assess the extent to which these companies are profiting.

“As it stands, FEMA is $23 billion in debt, continues to have problems with the affordability of its premiums, and is drastically underfunded. To be sending dollars out the door to these companies without any understanding of how much it actually costs them to administer the program is deeply troubling.

“FEMA and any of the companies it works with have a responsibility to ensure that policyholders are paid the claims they are owed and charged premiums that are fair – not shorted in the claims process or overcharged in their premiums while insurance companies continue to line their pockets.

“As we continue to work towards the reauthorization of the NFIP, fair compensation and proper oversight of the WYOs must be a top priority.”

Ranking Member Waters has long been concerned about the transparency and fairness of WYO compensation methodology. As one of the leading authors of the Biggert-Waters Act, she required FEMA to revise its methodology to account for the actual expenses of the WYOs. In July, 2016, she co-led a bipartisan letter asking FEMA to fulfill its legal obligation to provide oversight of the WYOs. The full text of the letter can be found here.


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