U.S. Rep. Gene Taylor sees fraud in insurer denials
He suspects NFIP, taxpayers being cheated

Gulfport MS Sun Herald
June 24, 2006

The federal government needs to investigate whether insurance companies have fraudulently denied Hurricane Katrina claims, U.S. Rep. Gene Taylor said Friday.

Taylor is convinced insurance companies have minimized wind damage, putting the burden on taxpayers to cover Katrina losses through the National Flood Insurance Program.

Research by his office shows the National Flood Insurance Program paid an average of $142,000 per residence in the three Coastal counties, while payments from private insurers have averaged $22,000.

"When given the opportunity to defraud the government, I think (insurance companies) did defraud the government," said Taylor, a Democrat from Bay St. Louis who is suing his insurer for refusing to cover damage to his waterfront home, as is U.S. Sen. Trent Lott, a Republican from Pascagoula.

Bob Hartwig, chief economist for the Insurance Information Institute, said Taylor's statistics are "meaningless."

"This comparison he's making is irrelevant and it's apples to oranges," he said.

In Mississippi, insurers have paid 355,000 homeowner claims, totaling $5.5 billion. In addition, 55,000 business claims will cost $7.5 billion, Hartwig said. Hartwig did not have a county-by-county breakdown to determine the average payment to Coast homeowners.

He said well over 90 percent of insurance claims in Mississippi have been settled.

"The fact that NFIP is paying this much suggests homes with flood coverage were pretty much destroyed," Hartwig said. "It was the most severe flooding event ever in the history of NFIP and what it says is when storm surge came up on a house it totally destroyed it, or nearly so."

Taylor will offer his proposal as an amendment to a bill that would provide $25 billion to NFIP. He said the amendment, requesting that the inspector general of Homeland Security investigate insurance companies, may not even make it out of committee for a full House vote. Two insurers, State Farm and Allstate, are headquartered in Illinois, home state of Republican House Speaker Dennis Hastert.

Sen. Lott is working on legislation to create a commission that would study the state of catastrophe insurance in America and make recommendations for changes.

One conflict Taylor would like to see remedied: Private insurers sell flood insurance and adjust both wind and flood claims written through their companies. He thinks adjusters are prone to blame damage on flooding to save money for their companies.

Copyright © 2006 by The Sun Herald (Knight Ridder)

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