- Read more on Sandy’s Aftermath
Brad Kieserman, who was assigned to manage the FEMA-run National Flood Insurance Program amid a scandal over alleged bad faith by insurance companies issuing so-called “write-your-own” (WYO) policies, is stepping down after only a few months, according to this report in the Asbury Park Press (see: “FEMA losing head of Sandy insurance fraud probe,” by Russ Zimmer).
“Kieserman, who had been elevated to head of FEMA's National Flood Insurance Program earlier this year, is departing for an executive position with the Red Cross,” the paper reports. “Kieserman's last day will be June 13. The news broke less than 24 hours before Kieserman was to testify during a Congressional hearing into allegations of systemic flood insurance fraud in the weeks and months after Sandy.”
At that hearing, Kieserman took the opportunity to describe the state of the NFIP to a Congressional subcommittee. His prepared written testimony is posted on the Department of Homeland Security’s website. Kieserman’s remarks describe a huge, loose network of private companies and individuals operating under only cursory and limited supervision from the agency.
Said Kieserman: “Hurricane Sandy showed us in several ways why the 47-year old NFIP is the proverbial melting iceberg: its product is stale and not well understood by consumers; some of the vital services the Program delivers to disaster survivors have decreased in quality over time; the outdated business model we use to deliver the Program makes increasingly little sense in the 21st Century; and many property owners required by law to purchase flood insurance fail to do so.”
But Kieserman describes a FEMA headquarters with less and less effective control over its flood insurance responsibilities. “By the time Sandy struck in 2012, FEMA’s role in the NFIP had devolved to loosely coordinating a broad-reaching network of actors FEMA relied upon to implement the Program,” said Kieserman. “This broad network that FEMA relies upon includes 82 private insurance companies responsible for over four million policies between themselves, a contractor who manages an additional one million policies FEMA sells and services directly, nine ‘vendors’ that actually service nearly 60 percent of the WYO policies, nearly 245,000 agents who sell flood insurance policies, 422,000 real estate brokers and agents, 53,000 title examiners, almost 300,000 loan officers, over 300 adjuster companies with about 6,000 certified flood adjusters, and an unknown number of structural engineers who provide consultative services to the adjuster companies… FEMA currently governs this insurance network that affects nearly six million people across the country with 80 federal employees in Washington, D.C.—not even enough to dedicate one employee to oversee each WYO.”
“The current business model affords FEMA limited interaction with the people who directly interact with our customers and deliver our Program, even though FEMA funds all costs of the Program and remains ultimately accountable for paying insurance claims fairly,” said Kieserman. “In this model, FEMA is often the last to know about serious issues in the delivery of the NFIP.”
Now that FEMA is aware of trouble in claims management, however, Kieserman said the agency is committed to making things right. “I think by now it is clear that the NFIP’s iceberg is melting,” he told the committee. “If the NFIP is going to continue to be the first line of defense against flood damage for millions of policyholders, then we must change the way we deliver the Program. I believe we must make substantial progress settling litigation and reviewing claims to recover the public trust necessary to undertake credible reform.”