Federal Emergency Management Agency: Improvements Needed to Enhance Oversight and Management of the National Flood Insurance Program
Highlights
In the wake of Hurricane Isabel in 2003, GAO was mandated by the Flood Insurance Reform Act of 2004 to report on issues related to the National Flood Insurance Program (NFIP) and its oversight and management by the Federal Emergency Management Agency (FEMA). Private insurance companies sell NFIP policies and adjust claims, while a private program contractor helps FEMA administer the NFIP. To address this mandate, this report assesses (1) the statutory and regulatory limitations on coverage for homeowners under the NFIP; (2) FEMA's role in monitoring and overseeing the NFIP; (3) FEMA's response to concerns regarding NFIP payments for Hurricane Isabel claims; and (4) the status of FEMA's implementation of provisions of the Flood Insurance Reform Act of 2004. Although impacts from Hurricane Katrina were not part of the report's scope, GAO recognizes that this disaster presents the NFIP with unprecedented challenges.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Directorate of Emergency Preparedness and Response | To improve FEMA's oversight and management of the NFIP, the Secretary of the Department of Homeland Security should direct the Under Secretary of Homeland Security for Emergency Preparedness and Response to use a methodologically valid approach to draw statistically representative samples of claims for underwriting and claims portions of operational reviews and for quality assurance reinspections of claims by general adjusters. | In GAO's most recent assessment of the Federal Emergency Management Agency's (FEMA) oversight of Write-Your-Own private (WYO) insurance companies who sell and service flood insurance policies, we reported that FEMA's March 2009 draft Control Plan changed the methodology to reflect this recommendation and FEMA documentation showed that the agency was selecting statistically representative samples of files to review for claims operation reviews and underwriting operation reviews. We also reported that, for claims reinspections, FEMA's March 2009 draft Control Plan changed the file selection methodology to partially implement our recommendation; i.e., a random selection, but only from a... population that fits certain criteria of over 400 claims per a single event. For our sample of 10 WYOs, we found that this eligible population represented a small portion (13 percent) of all claims filed in FY2007.
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| Directorate of Emergency Preparedness and Response | To improve FEMA's oversight and management of the NFIP, the Secretary of the Department of Homeland Security should direct the Under Secretary of Homeland Security for Emergency Preparedness and Response to develop documented plans with milestones for implementing requirements of the Flood Insurance Reform Act of 2004 to provide policyholders with a flood insurance claims handbook that meets statutory requirements, to establish a regulatory appeals process, and to ensure that insurance agents meet minimum NFIP education and training requirements. | In October 2005, we reported that the Federal Emergency Management Agency's (FEMA) flood insurance claims handbook did not fully comply with statutory requirements to include information regarding the appeals process that FEMA was statutorily required to establish through regulation. FEMA provided a revised Flood Insurance Claims Handbook, effective as of November 13, 2006, that includes a detailed description of the claims appeal process. FEMA sent a memo to flood insurance coordinators in December 2006 directing their attention to the revised handbook. We also reported that the establishment of a regulatory appeals process is required by section 205 of the Flood Insurance Reform Act of...
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