Questions remain about the Federal Emergency Management Agency's approach to flood-damage claims processed by private insurers for the government under its National Flood Insurance Program (NFIP) according to the GAO.
The GAO urged Congress to empower the agency to examine both wind and water claims data related to hurricane damages. It also said state regulators need to strengthen licensing and training requirements for insurance adjusters.
Rep. Spencer Bachus of Alabama said the GAO report contains "sensible recommendations" and deserves further discussion in the House of Representatives Financial Services Committee, where he is the ranking Republican member.
"We are ready to work with federal legislators and state regulators to ensure that the National Flood Insurance Program is administered correctly," said Cliston Brown, director of public affairs at the Property Casualty Insurers Association of America, an industry group.
Disputes over "wind versus water" damage have plagued State Farm, Allstate Corp and other insurers ever since Hurricane Katrina slammed into the Gulf Coast in August 2005 with 140-mile-per-hour winds and a massive flood surge.
After Katrina and Rita hit, some homeowners accused insurers of refusing to provide coverage by blaming hurricane damage on flooding, shifting claims onto the NFIP.