GAO Report Finds Flaws in NFIP

by Matthew Glans on June 17, 2011

More evidence that the National Flood Insurance Program (NFIP) is in dire need of reform surfaced this week. A new Government Accountability Office report found that the NFIP has failed to achieve many of its intended goals and lacks long term plans to correct them. According to a new article by Sean Carr of AM Best, the GAO report finds several serious flaws in the flood insurance program and makes several suggestions on how to improve the system.

“The Federal Emergency Management Agency has failed to develop goals, objectives or performance measures for the NFIP, which it oversees, the GAO found. Staff turnover is high; oversight of contractors is slight and record-keeping processes and systems are lacking, it reported. The NFIP’s insurance policy and claims management system is outdated, according to the GAO; FEMA dropped a seven-year, $40 million technology effort in 2009.”

Several insurance groups agreed with the reports findings, arguing that many of these problems have long been known to stakeholders in the NFIP, and that reform is long overdue.

“The GAO’s recommendations mirror those made repeatedly by most stakeholders over the past few years, only to see the debate sidetracked by the wind/water issue and other political agendas that ran contrary to good public policy,” Jimi Grande, senior vice president of federal affairs for the National Association of Mutual Insurance Companies, said in a statement. “With another voice added to the chorus of reform, it’s time for Congress to start listening.”

“The June 9 GAO report, as well as the preceding February report, make it clear that the NFIP is in need of substantial reform to ensure that it is a more stable and secure risk management tool,” Charles Symington, senior vice president of government affairs for the Independent Insurance Agents & Brokers of America, said in an email.”

Several bills have been proposed to correct some of the NFIP’s problems, seeking to allow rates to reflect actuarial costs and allow more opportunities for private insurers to participate in the system.

“A bill advanced by the House Financial Services Committee would extend the NFIP — now set to expire Sept. 30 — by five years. HR 1309 would also take steps to reflect actuarial costs, tie policy limits to inflation and expand opportunities for private insurers to participate. The bill also includes measures to improve the accuracy of flood maps and to set higher deductibles for rate-subsidized properties. At a Senate Banking Committee hearing this month, FEMA Administrator Craig Fugate called for more private sector participation in the flood insurance market. Without more private insurers entering the flood insurance marketplace, there is little chance that the NFIP will be able to handle a severe natural disaster without further adding to its already sizable debt, he said.”

The original AM Best story, “GAO: Flood Program Needs Broad System Reforms” by Sean Carr can be found online at:

Related Articles

    blog comments powered by Disqus

    Previous post:

    Next post: