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An End to WYO Flood Insurance

Posted By Administration, Tuesday, June 2, 2015

Superstorm Sandys claims handling and as New York Democrat Sen. Charles Schumer contends its widespread fraud and unjust denials has some in Congress thinking changes are in order.

Those changes would end letting private insurance carriers from writing and servicing policies.

The New York senator would prefer the Federal Emergency Management Agency (FEMA) make the changes rather than Congress. His reasoning? The Write Your Own program (WYO) is A) too profit-oriented and B) too complicated. Schumer wants a complete overhaul and is encouraging FEMA to scrap the program and move forward to overhaul the process entirely.

On the complication angle, Schumer said, potentially 80 different companies selling policies to property owners, 80 different systems for collecting premiums, and 80 different processes for calculating proper payouts to victims.

When it comes to profits, Schumer said the profit-motive encourages the WYO insurers to fight homeowners in court over a claim because they dont have to pay for the court costs. The only way to change this unacceptable culture is to scrap it, he said.

One of the arguments against Schumers suggestion is that the WYO system encourages competition. The senator says it doesnt. True competition does not exist in the current WYO model anyway, as these providers know that the federal government is ultimately paying for losses they must pay out.

FEMA spokesperson Rafael Lemaitre told Insurance Journal in light of the Superstorm Sandy claim denials his agency is looking into the process and is considering reforms. We expect WYO companies who partner with us to share FEMAs values of putting survivors first. Were pleased that Senator Schumer shares our concerns and as we work to reevaluate the program and consider future reforms, everything is on the table, including reexamining role that WYOs have in servicing our program.

WYO carriers get 30% of the premiums paid for commissions and expenses.


Source link: insurancejournal.com

Tags:  An End to WYO Flood Insurance  Flood  flood insurance  Insurance Content  Insurance Industry  Insurance News  Weekly Industry News 

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