The February 17 edition of the Insurance Journal describes substantial differences in how quickly insurers have acted on claims arising from superstorm Sandy. It cites data from the National Flood Insurance Program that indicates that, three and a half months after the storm, some of the private-sector companies that service flood insurance policies for the federal program have paid out on nearly all of their claims, while others have most of their claims outstanding. For example, the program found that Selective Insurance Co. of America, a New Jersey-based carrier with 18,599 flood claims from the storm, had been able to settle only 39% of them as of February. In contrast, Allstate Insurance Co. had closed 94% of its 16,309 claims.
So far, the program has received more than 138,000 claims related to Sandy. Companies participating in the program have collectively paid out $4.1 billion. The federal government ultimately pays all claim payouts. Insurance companies make a commission selling policies and keep a share of the annual premiums to cover administrative costs, but have none of their own capital at risk when claims are paid or denied. They are paid a fee for processing claims, but cannot collect until a claim is closed, meaning carriers that resolve things quickly get paid faster. Fee payments for approved claims are higher than they are for denials.
