More Could Be Done To Reduce It

CED-78-121: Published: May 31, 1978. Publicly Released: Jun 12, 1978.

Additional Materials:


Office of Public Affairs
(202) 512-4800

Fair Access to Insurance Requirements Plans, authorized under Federal law, are privately-owned organizations which operate like private insurance companies but are established primarily by State legislation. They provide property insurance to areas where the insurance industry will not provide coverage. The Federal Riot Reinsurance Program provides private insurance companies who participate in Fair Access Plans with riot reinsurance to protect them against excess losses during riots.

Arson-for-profit is considered a serious problem in the plans, as well as in private insurance. Factors cited as contributing to the problem were: inadequate investigations of arson cases; overinsurance of property, exceeding market value; and provision of insurance coverage to almost anyone requesting it. The amount of coverage given to property owners varies with the plans--some base it on market value but some provide any amount requested. The plans can refuse to insure for the full amount requested, but three of nine visited do not. Plans may refuse coverage, but reasons for doing so are limited. Depreciation is considered in paying claims but, in some States, deterioration is not considered in settlements for total property losses.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Housing and Urban Development should direct the Administrator, Federal Insurance Administration, to revise regulations to: require that all plans establish property value at the time of underwriting and eliminate the practice of giving property owners any amount of insurance desired; require all plans to obtain and consider information concerning the character of the property owner in its determination of insurability; and permit plans to use a 5-day cancellation notice with State insurance department approval in each instance. The Administrator should discuss the desirability of adopting the broad evidence rule basis with State insurance authorities in those States that require insurance payments at actual cash value without consideration of market value.

    Agency Affected:


Explore the full database of GAO's Open Recommendations »

Apr 27, 2017

Apr 13, 2017

Sep 7, 2016

Sep 6, 2016

Aug 24, 2016

May 26, 2016

Apr 18, 2016

Mar 24, 2016

Mar 10, 2016

Feb 4, 2016

Looking for more? Browse all our products here