The Federal Emergency Management Agency announced plans Monday to tighten oversight of engineering firms that work on flood insurance claims, marking the latest effort to address allegations that damage reports were falsified after superstorm Sandy.
The agency, which runs the National Flood Insurance Program, will require engineering firms to be approved by Washington before inspecting damaged homes. Previously, that discretion rested with private insurance companies hired to process the claims.
"FEMA will not fund or approve work with any engineering firms that are known to have values that differ from [the agency's] survivor-centric approach," FEMA spokesman Rafael Lemaitre said.
The move comes after a growing number of homeowners from Long Island, Brooklyn and New Jersey have accused insurers of conspiring with engineers to alter reports and deny settlements after the 2012 storm.
In response, FEMA has vowed reforms. The New York State attorney general's office is conducting a criminal probe.
Washington underwrites flood insurance. But FEMA hires insurance companies to administer the policies and determine how much to pay out on claims.
The government pays the settlements, but homeowners say insurers still lowball claims. That is primarily, they say, because the flood-insurance program penalizes insurers caught overinflating claims. There are no penalties for underpayments. So lawyers say insurers err on the side of paying too little -- and pressure engineers and adjusters to skew reports to avoid any chance of paying too much.
FEMA has promised to revamp the program to eliminate any incentives to underpay homeowners.