Protect homeowners from post-hurricane insurance fraud, Democrats tell southern states

Democrats on the House Oversight Committee are calling on five southern states to explain how they are keeping constituents from being ripped off by insurance companies.

As communities across the Southeast begin repairing the damage from Hurricanes Helene and Milton, "we must ensure that they are not further victimized by insurance companies refusing to fairly pay out claims," Ranking Member Jamie Raskin (D-Md.) wrote, in a letter co-signed by Democratic Florida Reps. Jared Moskowitz and Maxwell Frost.

The letters to the governments of Tennessee, North and South Carolina, Georgia and Florida come as the onslaught of the two hurricanes this fall exposed gaping holes in the nation's flood insurance coverage.

Those gaps, as well as the increasing withdrawal of insurance companies from areas at risk of natural disaster, represent a weak point in the systems of municipal finance that serve as the lifeblood for cities and towns across the U.S., and threaten to drive them into economic death spirals if home insurance fails.

On a smaller scale, losing insurance coverage before a storm — or having claims denied after — can wipe out the life savings of homeowners, leaving them with a totalled house they can neither sell nor afford to repair.

So far, insurers in the state of Florida alone have already denied 37,000 claims in the aftermath of Milton and Helene — or 10 percent of the total number that have been submitted, Newsweek reported

And September reporting by CBS News uncovered widespread allegations by former insurance industry claims adjusters that the companies they worked for had previously altered their reports to avoid paying out claims to Florida homeowners.

Separate reporting by The Washington Post found that Florida homeowners received payouts "45 to 97 percent" lower than the damages estimated by field adjusters after Ian.

In a sense, the House Oversight lawmakers acknowledged in their letters, such issues in the insurance industry are nothing new. "There is a decades-long pattern of bad actors in the insurance industry—both large and small insurers—shortchanging customers in the wake of natural disasters," the members wrote to the governments of the five states.

But they emphasized that risk of nonpayment of coverage consumers paid for was particularly urgent as climate change drives up the number of billion dollar disasters, "and as hurricanes reach further inland and higher elevations."

In particular, they flagged three potential methods by which insurance buyers could be defrauded — and called on the states to specifically collect documents on them.

First, the lawmakers wrote, there are cases in which an insurance company revises the damage amounts logged by a field adjuster by more than 90 percent — the type of distortion reported on by the Post and CBS.

Then, they continued, there are cases in which claims are cut by more than 10 percent on the basis that they are flood damage — a form of insurance that few Americans have, and virtually none of those who took significant damage during Helene — rather than wind damage, which is commonly covered.

Finally, the members called on state regulators to audit the guidance that insurance companies were giving to employees and contractors about how to process — and when to deny — claims.

In contrast with the actions called for in the letter, Florida has sought to tackle the rising costs — and widespread de-insurance — in its insurance sector by targeting not insurers' practices, but those of homeowners who take legal action against them.

The state's Republican-dominated legislature has pointed to post-storm lawsuits by homeowners — rather than ever-more-expensive homes in the way of worsening storms — as the prime cause of the state's rising prices.

In 2023, the state legislature passed a sweeping bill making it harder for homeowners to sue their insurance companies

Many Republicans are more broadly skeptical of the idea that climate change plays any role in rising insurance prices. In a June Senate hearing, Sens. Ron Johnson (R-Wis.) and Chuck Grassley (R-Iowa) blamed the rising prices on stimulus spending, including climate legislation, per the Georgia Recorder.