December 8, 2011
Contact: David Neustadt 212-709-1691
SUPERINTENDENT LAWSKY: FEMA AGREES THAT STATE REGULATORS ARE EMPOWERED TO HELP FLOOD VICTIMS
Benjamin M. Lawsky, Superintendent of Financial Services, announced today that the Federal Emergency Management Agency (FEMA) has issued a new bulletin telling insurance companies that they should cooperate with state regulators around the country on questions regarding federal flood insurance. Federal flood insurance is administered by FEMA and sold and serviced by property insurance companies. For most homeowners and businesses, insurance policies bought from the National Flood Insurance Program are their only protection against flood damage.
Following tropical storms Irene and Lee, the New York Department of Financial Services, at Governor Cuomo’s direction, was very active in ensuring that insurance companies and their agents and adjusters were responding adequately to help flood victims. In October, FEMA sent a letter to Superintendent Lawsky asserting that federal flood insurance is not subject to state regulation. The Cuomo Administration opposed this position in a letter to New York property insurance companies informing them that they are required to follow New York rules for fairness and promptness when servicing customers with federal flood insurance.
FEMA and New York officials met recently to discuss the best way to protect policyholders. FEMA then issued its new administrative bulletin to insurance companies.
Superintendent Lawsky said, “Tropical storms Irene and Lee caused massive damage that affected thousands of New Yorkers and helping them recover has been a top priority of Governor Cuomo and his Administration. We are gratified that FEMA now agrees that we can keep on fighting to help New Yorkers who were crushed by the floods. We will do everything in our power to ensure that insurance claims from these storms and any future storms are dealt with fairly and quickly. It is also a positive development that FEMA has chosen to issue this new bulletin nationwide, not just in New York.”
The FEMA memo refers to Write Your Own, the name for the program which has private insurers sell federal flood insurance. The memo states:
“It appears that there is some confusion regarding the appropriate information sharing that can occur between WYO companies selling and administering NFIP insurance and State insurance commissioners and regulators seeking information about flood insurance claims and claims handling activities. To clarify, FEMA encourages WYO companies to cooperate with interested State insurance commissioners and regulators with general flood insurance inquiries. Consistent with State and Federal requirements and practices, it is appropriate for WYO companies to respond to inquiries relating to the status of claims in the aggregate and the status of a specific claim, and to provide routine aggregate flood claims information. It also is appropriate for a company to identify that it is the insurer for a particular building or its contents and to acknowledge a specific claim...By this Bulletin, FEMA is encouraging cooperation and comity with State insurance commissioners and regulators.”
Following Irene and Lee, Governor Cuomo, Superintendent Lawsky and other state officials traveled to the hardest hit areas of the state and heard many complaints from citizens and business owners that insurers were slow to respond in handling their claims, which they desperately needed to rebuild and recover.
Both FEMA and New York have similar rules that set reasonable standards for insurers to respond promptly and fairly to policyholders.
“Flood insurance is a federal program administered by FEMA, but as FEMA recognizes, state regulators can play an important role in ensuring policyholders are treated properly,” Superintendent Lawsky said.