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THE NATIONAL FLOOD INSURANCE 

PROGRAM: OVERSIGHT OF 

SUPERSTORM SANDY CLAIMS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

HOUSING AND INSURANCE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

JUNE 2, 2015 

Printed for the use of the Committee on Financial Services 

Serial No. 114–28 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

DAVID SCHWEIKERT, Arizona 

FRANK GUINTA, New Hampshire 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

SUBCOMMITTEE ON HOUSING AND INSURANCE

BLAINE LUETKEMEYER, Missouri, Chairman 

LYNN A. WESTMORELAND, Georgia, Vice 

Chairman 

EDWARD R. ROYCE, California 

SCOTT GARRETT, New Jersey 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

DENNIS A. ROSS, Florida 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

ROGER WILLIAMS, Texas 

EMANUEL CLEAVER, Missouri, Ranking 

Member 

NYDIA M. VELA ́ ZQUEZ, New York 

MICHAEL E. CAPUANO, Massachusetts 

WM. LACY CLAY, Missouri 

AL GREEN, Texas 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

JOYCE BEATTY, Ohio 

DANIEL T. KILDEE, Michigan 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

June 2, 2015 ...................................................................................................... 1 

Appendix: 

June 2, 2015 ...................................................................................................... 39 

WITNESSES 

TUESDAY, JUNE 2, 2015 

Kieserman, Brad, Deputy Associate Administrator for Federal Insurance, Federal Insurance and Mitigation Administration, Federal Emergency Management Agency, U.S. Department of Homeland Security ..................................... 4 

APPENDIX 

Prepared statements: 

King, Hon. Peter T. .......................................................................................... 40 

Kieserman, Brad ............................................................................................... 41 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Luetkemeyer, Hon. Blaine: 

Written statement of the Property Casualty Insurers Association of 

America .......................................................................................................... 50 

Pearce, Hon. Stevan: 

Written responses to questions for the record submitted to Brad 

Kieserman ...................................................................................................... 56 

(1) 

THE NATIONAL FLOOD INSURANCE 

PROGRAM: OVERSIGHT OF 

SUPERSTORM SANDY CLAIMS 

Tuesday, June 2, 2015 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HOUSING

AND INSURANCE, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:12 p.m., in room 

2128, Rayburn House Office Building, Hon. Blaine Luetkemeyer 

[chairman of the subcommittee] presiding. 

Members present: Representatives Luetkemeyer, Garrett, Pearce, 

Posey, Hurt, Stivers, Ross, Barr, Rothfus, Williams; Cleaver, Velazquez, Capuano, Green, and Beatty. 

Ex officio present: Representatives Hensarling and Waters. 

Also present: Representative Meeks. 

Chairman LUETKEMEYER. The Subcommittee on Housing and Insurance will come to order. Without objection, the Chair is authorized to declare a recess of the subcommittee at any time. 

Today’s hearing is entitled, ‘‘The National Flood Insurance Program: Oversight of Superstorm Sandy Claims.’’ Before we begin, I 

would like to thank the witness, Mr. Kieserman, for appearing 

today. And I look forward to his testimony. 

I will now recognize myself for 2 minutes to give an opening 

statement. 

In October 2012, Superstorm Sandy made landfall, damaging or destroying 650,000 residences and resulting in $65 billion in losses. 

Years later, the media reported initial causes of fraudulent engineering reports that facilitated lower flood insurance claims. FEMA 

acted, but only after public prodding, and today is in the midst of 

a significant legal battle, attempting to settle as many cases as possible. Still, no one has been able to tell Congress or the public why 

these engineering firms operated in the fraudulent manner in 

which they are believed to have done. 

One question we must examine is whether or not perverse incentives exist within the National Flood Insurance Program (NFIP). 

Sandy wasn’t the first test of the NFIP, and unfortunately won’t 

be the last. Fraudulent reports and alleged underpayment of claims 

that came in the wake of Sandy highlight a significant underlying 

issue. Reform of the NFIP is needed and is needed now. Today, we 

hear from Brad Kieserman, FEMA’s Deputy Associate Administrator for Insurance. He is the individual charged with overseeing 

2 

the Sandy settlements claims process. It is my hope he will be able 

to be forthcoming in his testimony and that he will provide this 

subcommittee with a better understanding of the events that occurred following Sandy. Time and again, we have seen Americans 

suffer because of government’s failures, particularly when it comes 

to the National Flood Insurance Program. 

At this moment, what we know is that there was negligence and 

alleged fraud on the part of FEMA and certain engineering firms 

and that policyholders were mistreated. Today, we aim to garner 

more information on this situation, examine whether or not such 

significant issues presented themselves in the wake of similar disasters, and begin to discuss ways to fix a broken system in an effort to ensure it does more to benefit not only policyholders, but 

also taxpayers who foot much of the bill. 

The Chair now recognizes the gentlelady from New York, Ms. 

Velazquez, for 2 minutes. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. I want to thank you 

and the ranking member for convening this important hearing. 

Superstorm Sandy was one of the worst natural disasters in U.S. 

history and hit homeowners especially hard. From completely destroying homes to thousands of flooded basements, this storm 

wrecked havoc in my district, causing millions of dollars in damage. In the face of such devastation, my constituents expected 

Write Your Own insurance companies to honestly and fairly assess 

damages and pay claims. Unfortunately, it appears that did not 

happen. Mounting evidence suggests that peer-reviewed engineering reports were altered to specifically deny claims, citing that the 

damage was due to prior longstanding problems, even though the 

original report stated that Sandy was the cause. 

In other more egregious cases, reports were falsified to indicate 

no structural damage occurred at all, when, in fact, it did exist. 

These allegations are at the heart of today’s hearing. Falsified engineering reports, underpayment of claims, and lax oversight by 

FEMA paint a troubling picture that led to significant harm for 

many victims who rightfully thought they were covered. We owe it 

to the victims to thoroughly investigate what FEMA knew, when 

they knew it, and what is being done to fix the problem. But, most 

importantly, to ensure it never happens again. 

Today’s hearing will further that goal. And with that, I thank the 

chairman and the ranking member. And I yield back. 

Chairman LUETKEMEYER. I thank the gentlelady. 

With that, we go to the gentleman from New Jersey, Mr. Garrett, 

for 2 minutes. 

Mr. GARRETT. Thank you, Mr. Chairman. I would like to thank 

you for conducting this important hearing, and allowing us the opportunity to oversee the process of making those affected by 

Superstorm Sandy whole. Now, I was able to personally help some 

of those who suffered from the storm, personally able to help them 

to dig out of the rubble, if you will. So I saw the destruction and 

I saw the devastation firsthand of the storm. And I also saw the 

despair of the victims. But, at the same time, I also saw the 

strength and the determination of my constituents who worked 

hard to rebuild their homes and to rebuild their lives. 

3 

But after enduring the storm and the clean-up and all that went 

with it, the people of New Jersey then had to face yet another challenge: some doctored flood insurance claims that threatened their 

ability to rebuild. This, quite frankly, is unacceptable. Frankly, it 

is actually maddening. And I hope that we can work together to ensure that victims are not cheated and taken advantage of. And of 

course, importantly, we need to also make sure that the taxpayer 

is also taken into consideration for overpayments for Sandy and of 

waste and fraud. 

And with that, I again thank the chairman for the hearing. I look 

forward to a discussion of how we can best serve those who are 

continuing to rebuild. I yield back. 

Chairman LUETKEMEYER. I thank the gentleman. 

I now recognize the ranking member of the subcommittee, the 

gentleman from Missouri, Mr. Cleaver, for 2 minutes. 

Mr. CLEAVER. Thank you, Mr. Chairman. I would like to begin 

by thanking the Chair for the hearing. As many in this room know, 

Superstorm Sandy, which hit the United States in October of 2012, 

is estimated to have been the second costliest hurricane in U.S. history. It damaged 650,000 homes and resulted in $65 billion in damages. Of the 144,000 insurance claims that have been filed, 2,800 

were appealed. And because I have a boring life, last night I 

watched the 60 Minutes episode on the investigation of charges 

that many of the insurance claims were underpaid or doctored by 

engineering firms. 

A number of news stories have further echoed the same charge. 

In light of these grave claims, it is paramount that this subcommittee hold a hearing to determine the severity of these allegations, to assess FEMA’s role or lack thereof in overseeing the Write 

Your Own flood policy, and to discuss how FEMA will reassess 

these claims and restructure their policies in light of these allegations. 

My congressional district was not impacted by Superstorm 

Sandy. Mother Nature, however, does not discriminate, not by city, 

by district, or by red or blue. As members of this committee, it is 

our responsibility to ensure that when disaster strikes, our constituents have the resources to rebuild in ways that allow them to 

move forward with their lives. I look forward to hearing from you, 

Mr. Director. And hopefully, many of the issues we have can be resolved. Thank you. 

Chairman LUETKEMEYER. I thank the gentleman. 

With that, we have the gentleman from Texas, Mr. Green, for 1 

minute. 

Mr. GREEN. Thank you, Mr. Chairman. I especially thank you 

and the ranking member for this hearing. Because, as you know, 

on Memorial Day, in Texas, we had an inundation. And, literally, 

we have had trillions, trillions of gallons of water in Texas. And my 

congressional district in Houston, Texas, has been hit. We have one 

apartment complex, the Rockport Apartments, where hundreds of 

people have had to be relocated. Some of the units are uninhabitable. And we also have had an area in my district with homes that 

have been flooded to the extent that people are losing everything 

that they have on the first floor. Whatever they had on the first 

floor, I think, is lost. I have actually gone to them. I have been in 

4 

their homes. I have seen it with my own eyes. And my hope is that 

we will be able to bring some resolution to the issue of concern 

today. Because we don’t want to see other persons visited with 

these same concerns, especially when they are suffering and are expecting a helping hand, a hand up, not some person who is going 

to defraud them. 

So I thank you, Mr. Chairman. And I thank the witness for appearing today as well. 

Chairman LUETKEMEYER. I thank the gentleman. 

We will now hear from our witness. Today, we welcome the testimony of Mr. Brad Kieserman, Deputy Associate Administrator for 

Federal Insurance at the Federal Emergency Management Agency. 

Mr. Kieserman, you will be recognized for 5 minutes to give your 

oral statement, and without objection, your written statement will 

be made a part of the record. And with that, you are recognized 

to proceed. 

STATEMENT OF BRAD KIESERMAN, DEPUTY ASSOCIATE ADMINISTRATOR FOR FEDERAL INSURANCE, FEDERAL INSURANCE AND MITIGATION ADMINISTRATION, FEDERAL EMERGENCY MANAGEMENT AGENCY, U.S. DEPARTMENT OF 

HOMELAND SECURITY 

Mr. KIESERMAN. Thank you, Mr. Chairman. Chairman Luetkemeyer, Ranking Member Cleaver, and members of the subcommittee, as you know, I am Brad Kieserman, the Deputy Associate Administrator for Federal Insurance in the Department of 

Homeland Security’s Federal Emergency Management Agency. I 

am grateful for the opportunity to be here today. But I will be honest with you, I am regretful about the circumstances. 

Congressman Green, your comments resonated with me. I will 

tell you why, in particular, I have been very focused on Texas over 

the last week or so, along with my colleague, Deputy Associate Administrator Wright, who is here behind me. And there is a personal 

reason why. In 1972, my grandparents, Ben and Bertha Levy, lived 

in Wilkes-Barre, Pennsylvania, when that community was devastated by Hurricane Agnes and the flooding associated with it. 

While the flood waters did not kill my grandparents, the experience 

afterwards did. I was 10 years old. I have had a lot of opportunity, 

unfortunately, to think about that and remember it since Sandy, 

and over the last 114 days since I have been in this job. 

Because about 120 days ago, the Administrator of FEMA, Craig 

Fugate, came to me and said, ‘‘We have a problem. I need you to 

go solve it for me.’’ Many people ask me what happened in Sandy. 

I think what happened is fairly simple to describe, but painful. 

There are some people, survivors of Sandy, who paid premiums, 

some for many years, for flood insurance. And they did not get 

what they were entitled to. They did not get what they deserved. 

Their government let them down. Their insurance company let 

them down. And people came to their homes and some of those people did wrong by those survivors. 

There is a lot of talk about why it happened. People want to talk 

about the incentive structure that is in place. I am not sure I am 

going to be able to give you very fulfilling answers on that today. 

But I will tell you why I think this happened. Why I think this 

5 

happened is because the National Flood Insurance Program needs 

to be reformed. It has lost contact, it has lost connection with its 

survivors, with its customers, with its policyholders, with its premium payers. And I will tell you this, floods are the number one 

disaster in this country. You don’t have to look any further than 

Texas, sir, to see that. And they continue to be the number one 

natural disaster in this country. And as long as that is the case, 

Americans will need flood insurance to help manage their risk. And 

they deserve a program they can count on. 

And over the past 32 years, since we put into place the publicprivate partnership that is the Write Your Own Program, in which 

commercial insurance companies deliver about 83 percent of the 

services in the National Flood Insurance Program, we have allowed 

that program to grow to be a highly distributed network. It really 

lacks adequate governance. And we have lost the capability and the 

capacity to detect and monitor problems in that program. And here 

is the proof of that. Two years after Sandy, a Federal court judge 

finally set down in writing that he had seen reprehensible gamesmanship on the part of some people delivering the program. And 

he expressed concern that that may represent systemic wrongdoing 

in the program. It shouldn’t have taken 2 years to recognize that. 

And it should never take 2 years to recognize that again. 

There is a great book about organizational change called, ‘‘Your 

Iceberg is Melting.’’ It is written by Dr. John Cotter. The National 

Flood Insurance Program iceberg is melting. And what we saw in 

Sandy was the tip of it. The numbers don’t tell the whole story, but 

let me talk about the numbers for just a moment. We had 144,000 

claims for insurance filed in Sandy. We paid out $8 billion. Of 

those, about 3 or 4 percent of the people filed appeals to FEMA disagreeing with what their insurance company gave them, 3 percent. 

Another 11⁄2 percent ultimately sued their insurance company or 

FEMA. 

And so you can say well, those numbers indicate that the problem is not that big. There is not really a serious issue. But those 

numbers don’t tell the whole story. Those numbers are just the tip 

of the iceberg that is melting. And those numbers represent individual people like my grandparents, the Levys, and like some of 

our litigants, the Morellos or the Rameys, and the others that, Congressman, you saw on 60 Minutes. And for those people, this inability to detect their problem and react to it in a timely way devastated their lives. We cannot allow that to happen again. And so, 

we are settling claims. We are reviewing claims. And we are going 

to reform this program. 

I should inform the committee, in my final seconds here, before 

I take your questions, that I have tendered my resignation. I will 

be leaving FEMA on the 12th of June. I have accepted a position 

with the American Red Cross to be the vice president for operations and logistics. It was, literally, an opportunity I couldn’t afford to decline. I care deeply about the work that the task force is 

doing. The Administrator, the Secretary, and the Deputy Administrator of FEMA are deeply committed to this. Mr. Wright, who is 

behind me, will take the helm of the Federal Insurance and Mitigation Administration. And he will drive forward to lead these reVerDate Nov 24 2008 18:54 Dec 07, 2015 Jkt 096989 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\96989.TXT TERI
6 

forms and to lead this change. I look forward to taking the committee’s questions today. And, again, I thank you for the time. 

[The prepared statement of Mr. Kieserman can be found on page 

41 of the appendix.] 

Chairman LUETKEMEYER. Thank you, Mr. Kieserman. I appreciate your testimony today. 

And with that, I will begin the questioning by recognizing myself 

for 5 minutes. 

You said that the percentage of Sandy claims that remain, I 

guess that were in litigation, people who weren’t happy, was about 

11⁄2 percent? 

Mr. KIESERMAN. That is correct, Congressman. 

Chairman LUETKEMEYER. What percent of those have you resolved? 

Mr. KIESERMAN. We currently have—we began with 2,200 claims 

in litigation in the fall of 2014. We are down to about 900 claims 

in New York and about 1,100 claims in New Jersey. Of those, 

through the settlement process that we began about 110 days ago, 

we have tentatively settled 60 percent of the cases in New York 

and 40 percent of the cases in New Jersey. My goal and expectation 

is that FEMA will be able to offer every litigant in New York and 

New Jersey, who was in litigation as of February when we began 

this process, with a fair and reasonable settlement by the end of 

August of this year. And that those who wish to litigate after that 

will certainly have the opportunity to do so. But our goal is to offer 

every litigant a fair and reasonable settlement. And we are well on 

our way to doing that. 

Chairman LUETKEMEYER. With regard to the settlements, because some of the fraud allegations and realization of it came to 

light after some of the folks probably had their claims settled, do 

they have the ability to go back and get further restitution for their 

claim? Or do they have to present a situation where they believe 

they were defrauded and then show that they do have just cause 

to be considered for some further payment? How is it going to 

work, I guess is the question I need to ask. 

Mr. KIESERMAN. It is really on a case-by-case basis. And it depends on the release they executed and where their settlement was 

at the time that this process began. There were about 400 or so 

cases that had been mediated with plaintiffs and defense attorneys 

and a mediator and folks agreed to the settlement of claims prior 

to our initiation of the process. If they signed a release of all 

claims, then they are complete with the process. A number of those 

cases had not been finalized at the time our process began. And so, 

we are moving forward to treat them within the scope of the process. 

Chairman LUETKEMEYER. You made the comment that it looks 

like, quite frankly, rats off a sinking ship here with as many people 

leaving FEMA as they are and the Flood Program here. We are 

concerned that with this leadership leaving, maybe the bad apples 

are leaving, but maybe the folks who just don’t want to deal with 

it are taking leave and leaving the ship without some folks to man 

the rudder here. 

And I am kind of concerned about the direction of the program. 

What do you see? You said the program lacks governance. Can you 

7 

explain that, and how that is going to be impacted by all the folks 

who are leaving, including yourself? 

Mr. KIESERMAN. I guess I would begin by saying that my departure is motivated by nothing other than the fact that I have one 

son in out-of-State tuition at the University of Michigan and another son who dropped out of college and dropped back in. So I am 

putting two boys through school at the same time. I have been in 

Federal service for nearly 29 years. And I need to look after my 

family. I am not leaving for any other reason. I am very dedicated 

to Secretary Johnson, Administrator Fugate, and Deputy Administrator Nimmich. And I am very committed to this program. I am 

going to the Red Cross so I can keep helping people. Mr. Wright, 

who is behind me, is an outstanding senior executive. 

Chairman LUETKEMEYER. Okay. But my question was, you made 

the statement that the program lacks governance, we are losing 

some people. You said it needs reform. So tell us what your suggestions are going to be or would be for reforming it and getting that 

governance that you testified, yourself, that it needs. 

Mr. KIESERMAN. I think we need to begin from the premise that 

governance needs to focus on customer service and governance 

needs to put the survivor first. So we need to figure out—first of 

all, the structure of the Write Your Own Program and the structure of how FEMA administers its policies on the direct side, frankly, is an anachronism to me. So I think we are going to have to 

look at that from a forensic accounting perspective and understand 

the various layers that have accrued during the years. 

For example, there are 82 Write Your Own companies plus 

FEMA. Between FEMA and one of those other Write Your Own 

companies, we have about 35 to 40 percent of all of the policies in 

force in the United States, 5.3 million total policies. Two entities 

have 35 to 40 percent of those. And then, 81 entities have the balance of the 60, 65 percent. That business model intuitively doesn’t 

make sense. Why can 2 handle 20 percent or 40 percent and then 

you have 81 to do the rest? That is a business model that was allowed to grow over the years. And as that business model has 

grown, what has happened is that many of the Write Your Own 

companies and FEMA have contracted out for these services. Because I have to tell you, this is a contract program. There is no one 

out there wearing a FEMA shirt or a U.S. Government employee 

shirt who is adjusting a claim. There is no one out there providing 

engineering services who is a Government employee. All of that is 

contracted for. 

So this is fundamentally going to be a contractual relationship if 

you want to have the capacity and capability and professionals in 

the field. So the question becomes, how do you govern that network 

of contract professionals in a way that is survivor-centric? Because 

flood insurance is another Emergency Management Program that 

has to focus on the survivor. 

Chairman LUETKEMEYER. I am going to have to interrupt you. 

My time is up. If you see the little red button on there, you probably need to start winding up your comments because, otherwise, 

I have the gavel. With that, let me turn to the ranking member of 

the subcommittee, Mr. Cleaver from Missouri, for his 5 minutes. 

8 

Mr. CLEAVER. Thank you, Mr. Chairman. And Mr. Kieserman, 

thank you for your service with FEMA. I am sure it hasn’t been 

all roses. But thank you nevertheless. 

I was born and raised in Texas, following up on what Mr. Green 

said earlier. And having gone to high school in Wichita Falls, it is 

hard to imagine that there was mandatory evacuation. My father 

lived in an area that didn’t have to be evacuated during this flooding, but all around him did. I am thrilled over the fact that the 

flooding didn’t hit him because he didn’t have any flood insurance. 

And probably most of the people in Wichita Falls, not one of the 

great places of flooding, would have insurance. 

Mark Hanna of the Insurance Council in Texas has said that he 

believes less than half of the homeowners, half of them, have flood 

insurance. So why is it that you think most people in this area lack 

flood insurance, even though this is not a place that is going to be 

hit often? But do you have any idea why? 

Mr. KIESERMAN. Flood insurance, the purchase of flood insurance, Congressman, is only mandatory in the special flood hazard 

area, an area that is mapped for a particular hazard. Outside of 

that, it is not mandatory. However, it is interesting that nearly 25 

percent of the claims we pay come from people who are outside 

that mandatory purchase area. So why don’t people buy flood insurance? I suspect it is for the same reason that people don’t wear 

seat belts and take other risks in life. They look at the cost-benefit 

analysis, probably not unlike my grandparents in 1972, and they 

assess what they believe their risk of flood is and whether they 

want to pay out the premium every month. And so, I think that 

is one of the reasons that people don’t buy flood insurance. 

Mr. CLEAVER. But even if they do, there is something wrong with 

the way insurance companies process claims. I was on this committee when Hurricane Katrina hit. And a number of us, including, 

I think, Mr. Green went and held hearings in New Orleans and in 

Mississippi. At Senator Trent Lott’s house, I stood on the stoop of 

his house. That was the only thing remaining. It was the same 

thing at Congressman Gene Green’s house; the only thing remaining was the stoop. Nothing else was there. And I think many Members of Congress were completely outraged that these two individuals were denied the insurance company protection from this flood 

because, all of a sudden, the insurance company, that was one of 

the biggest in the country, said well, I’m sorry, sir, that we can’t 

pay this claim. You have flood insurance. And your house was not 

washed away, it was blown away. So should we have blow-away insurance? Something is not right. I am not accusing anybody of anything. I am accusing the not-right scenario that is being played out 

again and again and again after disasters. What do you have to say 

to that? 

Mr. KIESERMAN. Congressman, there is a line-drawing exercise 

that I have observed as you have. In Katrina, it was wind versus 

water. In Sandy, it was earth movement versus flood damage. I 

have to tell you, I don’t think we are particularly good at drawing 

those lines. And I have seen many cases, in just working the Sandy 

cases alone, where one professionally licensed engineer will come 

in and say that the damage was caused by flood and another will 

come in and say it was caused by earth movement or, as CongressVerDate Nov 24 2008 18:54 Dec 07, 2015 Jkt 096989 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 K:\DOCS\96989.TXT TERI
9 

woman Velazquez said, by preexisting damage. My experience with 

this is that any time we try to draw those lines, we don’t always 

get it right, and we end up with very frustrated customers. 

And the other thing I would share with you is that many people 

don’t understand the insurance coverage they bought. We need to 

do a better job helping them understand the product. Because the 

flood insurance product is a subsidized product and it doesn’t cover 

everything. It has a lot of— 

Mr. CLEAVER. What can we do with insurance companies to hold 

them more accountable for all of these problems that exist after 

major tragedies? 

Mr. KIESERMAN. I think insurance companies have to understand 

and acknowledge the role that they played in Sandy and where 

things went wrong there. I think they can be part of the solution 

as well. And I think, to the point I made earlier about better governance in the network, how do we hold those companies, adjusters, agents, bankers, and others who communicate with policyholders more accountable for helping them understand what they 

are buying and what their risk is. We all have to do a better job 

at risk communication. And I think there are a number of interventions we can take there. 

Mr. CLEAVER. Thank you. 

Chairman LUETKEMEYER. I thank the gentleman. With that, we 

go to the gentleman from New Jersey, Mr. Garrett, for 5 minutes. 

Mr. GARRETT. Thank you. Besides the insurance companies, I 

have heard reports—I will just throw it out there, whether it is 

true or not—that there are engineering firms, as well, that are accused of wrongdoing. If engineering firms have been found to act 

improperly, if they doctored reports or did anything else like that, 

then they obviously not only have victimized the government, but 

it is fair to say that they have victimized the Sandy victims as well, 

wouldn’t you agree? 

Mr. KIESERMAN. Yes, Congressman. 

Mr. GARRETT. Right. What is the status, briefly, of those cases 

right now? And do you know if there is a history with those particular firms that you are going to speak of, of this sort of thing? 

Mr. KIESERMAN. Congressman, I would begin by saying that 

FEMA is neither a law enforcement agency nor a regulatory agency. And I think it is imperative to understand the role that we play 

here. We deliver a flood insurance program. And some of the participants in that program have engaged, at a minimum, in highly 

irregular practices. I will leave it to the courts and the criminal investigators to determine whether they violated the law. The New 

York State Attorney General’s Office and the New Jersey Attorney 

General’s Office are investigating, very aggressively I might add, at 

least two of the engineering firms. 

Mr. GARRETT. And is there a history with these firms in the system, so to speak? 

Mr. KIESERMAN. There are those who say that there is prior misconduct. And, again, I think that it is up to those who say that to 

prove it. But what I can say is that the president of at least one 

of those firms was disbarred from the practice of law for allegedly 

being involved in the commission of fraud. That firm and that individual should never have been allowed to participate— 

10 

Mr. GARRETT. So he is responsible for his own conduct. Who is 

responsible here in the government for making sure that people 

who have been disbarred or who have a history of wrongdoing not 

be allowed to be in this system that we have? 

Mr. KIESERMAN. Today, Congressman, I am responsible for that 

in the National Flood Insurance Program. It is for that reason that 

we have withdrawn the authority of insurance companies to make 

any allocation or— 

Mr. GARRETT. Should that have been done by someone, you or 

otherwise, before Sandy occurred, making sure that if there is a list 

of bad actors, that these bad actors should not be allowed to be involved? 

Mr. KIESERMAN. I think, first, you have to detect it before you 

can deal with it—to my earlier point about the need to build in better governance and the ability to detect and monitor this problem. 

Mr. GARRETT. That is what I am asking. In other words, did 

these folks that we see now are bad guys, have a history of being 

bad guys that we should have known beforehand? 

Mr. KIESERMAN. I think we should have had mechanisms in 

place to know that there were problems, to know, first of all, that 

the companies were not necessarily run by reputable people. And, 

second of all, to identify the problems long before a Federal judge 

had to tell us about it. I think both of those things should have 

happened and need to be done. 

Mr. GARRETT. So when the judge—I didn’t read the judge’s opinion, I am just going by your quotes here—said that there was systemic wrongdoing and reprehensible conduct, I assume, I am guessing here that the systemic wrongdoing involves not only these bad 

guys, the bad engineers and the claims adjusters or anybody else, 

but it sounds like there is a systemic problem with the Flood Insurance Program, as well as this one point, that we didn’t look at for 

the last several decades to see who the bad guys were. So he is saying that there is a systemic problem in the system, right? 

Mr. KIESERMAN. That is my understanding. And that is certainly 

how I approached it when I took the job. 

Mr. GARRETT. Right. And so when you talk about the issues of 

well, they were just bringing up that there are certain cases, there 

is wind damage, certain times there are earth movements, other 

times there are problems that we have heard repeatedly storm 

after storm after storm. And, yet, here we are again in 2015, and 

I am trying to figure out what the common denominator is. 

We know there are always going to be bad actors in the world. 

That is one common denominator. But the other common denominator is FEMA and the Flood Insurance Program in general. That 

is the common denominator over storm after storm after storm, 

decade after decade after decade, and as the judge calls it, a systemic problem. That seems to be where the problem is. And we 

have had these hearings before. We have reformed before. And we 

just come back again time and time again with the same systemic 

problem. 

Mr. KIESERMAN. Congressman, I would say that the common denominator to emergency management in this country is FEMA and 

that FEMA helps millions and millions of people every year. And 

no one should forget that. I think it is absolutely the case that the 

11 

National Flood Insurance Program needs to be reformed. And I 

would tell you, back to my analogy about the iceberg melting, there 

are a lot of people in the insurance business and in the banking 

business and in other businesses who would tell you there is nothing wrong, this is a small number of claims. I am not sitting here 

telling you that today and neither is Administrator Fugate or Deputy Associate Administrator Wright. We are absolutely acknowledging that this iceberg is melting. We are just seeing the tip of 

it. And it needs to change. But I need this body and we need the 

others to help maintain that sense of urgency around this issue. 

Otherwise, it will just slip back again. 

Mr. GARRETT. I yield back. 

Chairman LUETKEMEYER. I thank the gentleman. Next for questions, Ms. Velazquez, the gentlelady from New York, for 5 minutes. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. Mr. Kieserman, I 

hear that you admitted that FEMA knew or should have known 

that there were claims of underpayment and fraud as early as 

2013? 

Mr. KIESERMAN. That is correct, Congresswoman. 

Ms. VELAZQUEZ. So here you are. You said that FEMA is not an 

enforcer and FEMA is not a regulator. But what do you do when 

you made a statement like this, that you knew since 2013, so what 

do you do? 

Mr. KIESERMAN. I think you do three things. You offer people a 

fair and reasonable settlement in litigation because they should 

have never had to sue you to get what they are entitled to. You 

open up the process and you offer people the opportunity, the 

142,000 people who didn’t sue us and sue the Write Your Own companies, the opportunity to have their claims reviewed. Because, 

given what has come to light, they should have that opportunity if 

they choose to. And then, finally, I think you set a course in motion 

to reform the program and to reform it permanently, so that we 

don’t continue to go through this cycle. 

Ms. VELAZQUEZ. What do you do with the Write Your Own participants? How do you hold them accountable? How do you send a 

strong message that we are not going to allow this type of behavior 

to ever happen again? 

Mr. KIESERMAN. I think there are a number of steps. The first 

was taking control of litigation. Normally, in the litigation process, 

the Write Your Owns make the decision, FEMA pays all the 

money. We have taken control of litigation and we are settling 

claims. And we are doing that in ways that probably the Write 

Your Owns would prefer we didn’t. But we are doing it that way 

anyway. 

I would also say that the other thing we have to do with the 

Write Your Owns is try to make those who are willing be part of 

the solution. Because we will never have the capacity as a Federal 

Government to deliver an insurance program to 5.3 million Americans. We are going to need the insurance industry to help us with 

that. So I think we have to set a standard. We have to set a culture 

of being survivor-centric. And I think we have to be careful not to 

alienate the very people whom we need to deliver the program. 

12 

Ms. VELAZQUEZ. But we need to send a strong message to those 

in the industry. What type of stiffer penalties can we put in place 

to hold them accountable? 

Mr. KIESERMAN. Congresswoman, I think the first thing we have 

to recognize is that before we start penalizing anyone, there are 

court proceedings that are going on and investigations going on. 

And I didn’t wait for those, we didn’t wait for those to conclude in 

order to try to compensate survivors through litigation and through 

claims. But I do think it is imperative to get to dispassionate facts 

about who did what and what really happened. So, for now, what 

I have done—yes, ma’am. Thank you. 

Ms. VELAZQUEZ. Okay. I have other questions. In March, FEMA 

announced that they would reopen all 144,000 Sandy-related flood 

insurance claims for review. And while this is good news, many 

homeowners at the time may not have taken advantage of other 

Federal recovery programs like SBA disaster loans, with the reasonable assumption that their insurance would be honored. In light 

of the fraud allegations, should we reopen other forms of assistance 

for those who thought they were covered by insurance, were denied, and missed out on applying for a loan? 

Mr. KIESERMAN. Congresswoman, I think that is a question for 

the SBA and, to the extent that it involves grants, for HUD and 

its grantees. From my perspective, we believe there was a sufficient 

basis to provide people the opportunity to have their insurance 

claims reviewed. And that is what we are doing. 

Ms. VELAZQUEZ. It is our understanding that FEMA and SBA 

have worked out a way to avoid the duplication of benefits issued 

using a joint checks model. However, SBA was not the only entity 

providing assistance after Sandy. Will FEMA work with New York 

City to replicate that model to expedite and lessen the burden resulting from overpayments to homeowners from the city? 

Mr. KIESERMAN. We have worked with New York City, with New 

York State, and with New Jersey State. And we will continue to 

do so. But everyone should understand that a grantor like New 

York City and New York State and New Jersey stands in different 

shoes than a loan maker like SBA. Policyholders assign their rights 

to policy proceeds to SBA so that SBA has a secured interest. That 

is not the case for the grant makers. 

So I would say that if anybody took an SBA loan, we are working 

with SBA, and if SBA determines there is a duplication, then folks 

can use their insurance policy proceeds to pay down their loan. But 

if folks took a grant from one of the HUD CDBG grantees, then it 

is going to be imperative for them to decide whether they want to 

go through this process. Because they very likely already received 

funds for the exact same purpose we would give them money. And 

they will have a debt when that is over. 

Ms. VELAZQUEZ. Going back to the handful of engineering firms 

that seem to be at the root of the Sandy fraud cases, how does 

FEMA currently conduct oversight over third-party contractors? 

And how, again, are these firms held accountable? 

Mr. KIESERMAN. Recognizing the time, the oversight is conducted 

through what are called operational reviews that are conducted for 

a week every 3 years. They are wholly inadequate in my view. 

There are other existing forms, like monitoring for improper payVerDate Nov 24 2008 18:54 Dec 07, 2015 Jkt 096989 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\96989.TXT TERI
13 

ments. But, again, I think we have lost sight of the network. And 

these are not adequate mechanisms. But those are the ones that 

are in place. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. I yield back. 

Chairman LUETKEMEYER. I thank the gentlelady. Her time has 

expired. With that, we go to the gentleman from Florida, Mr. 

Posey, for 5 minutes. 

Mr. POSEY. Thank you, Mr. Chairman. Mr. Kieserman, thank for 

your candid responses. I very much appreciate it. Somebody joked 

earlier—you mentioned that one of your sons dropped out of college 

temporarily, and somebody said that if you asked him why, he is 

so straightforward, he would probably tell you. That is a real compliment. We don’t get a lot of that. We get a lot of people who like 

to dodge answering any questions or giving straight yes-or-no answers. So hats off to you for that. Thank you. And good luck at the 

Red Cross. 

What amount do you think was knowingly paid in losses to nonSandy related property? 

Mr. KIESERMAN. I don’t have a number for that, Congressman. 

I will have to get back to you on that one. I honestly don’t have 

a number for that at all. I’m sorry. Especially after those nice compliments, I feel bad. But I don’t know the answer. 

Mr. POSEY. I shouldn’t have said anything. Are you aware that 

some were knowingly paid that were non-Sandy related? 

Mr. KIESERMAN. I was not aware of that, sir. 

Mr. POSEY. Like millions of dollars for new roofs on museums 

within a stone’s throw of this building? 

Mr. KIESERMAN. I don’t know that those were flood insurance 

funds as opposed to funds from other agencies. But we can get back 

to you on that. 

Mr. POSEY. Yes. And I am looking at the whole Sandy package. 

I know there was a lot of pork in there when I read it that wasn’t 

related. And I know that the Rules Committee felt it was not in 

order to require an amendment that said all Sandy-related losses 

have to be related to Sandy. I know that is good congressional 

sense. But it is not good common sense. 

And so my question to you is, how do you think Congress can 

better exercise its ability to perform oversight in the future? Members of Congress are really good at sitting back and patting ourselves on the back, saying we have it under control, until we have 

a catastrophic loss here, there, or elsewhere. And then, of course, 

it is the insurance industry’s fault. It is the agency’s fault. It is 

everybody’s fault but Congress. What do you think Congress can be 

doing actually to be more engaged to make sure we don’t have this 

kind of dysfunction when the time comes? 

Mr. KIESERMAN. Congressman, I think you hit the nail on the 

head. We all tend to pay attention to the catastrophic. But the reality is that in an average loss year for insurance or an average 

disaster year for the country, that is the time to be paying attention. That is the time to hold hearings. That is the time to ask 

questions. That is the time for the agency to be looking at its organization. That is the time for that to happen. Because when the 

catastrophic occurs, it is all hands on deck and we are just trying 

14 

to deal with the moment. I think the key, as you pointed out, is 

having that level of attention when it is a non-catastrophic event. 

Mr. POSEY. Exactly. Do you have any suggestions as to how we 

might engage that? Are there experts that we should bring in to 

do an audit? Do you think an Inspector General is sufficient? How 

do we look at doing a dry run? Do they have that? And who analyzes the results of those things? 

Mr. KIESERMAN. I think GAO has done phenomenal work. And 

I would urge you to continue their use. I have reached out to GAO 

and they have begun an audit on our program to help us understand the forensics of where the money goes. I am a big believer 

in ‘‘follow the money’’ and that will help you understand the organization. And I think GAO can be a great asset to this body. 

Mr. POSEY. Has there been—certainly we have all heard of people who dropped the ball, who didn’t do their job. Unfortunately, 

some of them were Federal employees. What has been the level of 

discipline for those employees who did not perform as they should 

have in this situation? 

Mr. KIESERMAN. As you know, there are several senior employees 

who have chosen to resign or retire as a result of this. And by 

doing that, I think they recognize their role and create space for 

others to come in and make change. There are some less senior employees whom I have asked the Inspector General to investigate so 

that we can, again, give everyone the process they are due, survivors, employees, contractors, everyone, so that we can understand. So I have asked the Inspector General to look at the performance of several employees whom I believe had information 

about this and should have alerted senior leadership earlier in the 

process. I am awaiting those investigations. 

Mr. POSEY. I would hope that you would also include those members who have resigned and moved on. We had similar problems 

with Madoff at the SEC. And the Secretary came in here and actually told me, ‘‘We haven’t disciplined anybody yet. But it might 

make you comfortable to know that X number of people resigned.’’ 

Well, it really doesn’t make me comfortable. They probably have 

similar high-paying positions in other agencies that we are paying. 

And it is like saying that when a pedophile changes neighborhoods, 

the problem is solved. 

Mr. KIESERMAN. I agree, Congressman. Accountability doesn’t 

stop when you leave the agency. I doubt it will stop for me. And 

it shouldn’t stop for others. I can tell you that the States Attorneys 

General that are looking at this and the Inspector General are 

looking at anyone who is involved, regardless of their current employment status. 

Mr. POSEY. Okay. Mr. Chairman, I hope we will get a report and 

an update on that. Even if he is gone, I would like to see the results of that for our committee. Thank you. 

Chairman LUETKEMEYER. Absolutely. I thank the gentleman. 

And his time has expired. With that, we go to the gentleman from 

Texas, Mr. Green for 5 minutes. 

Mr. GREEN. Thank you again, Mr. Chairman, and I thank the 

ranking member as well. I have been in Congress for a number of 

years. And I must say that I agree with Mr. Posey. Mr. Kieserman, 

sir, your testimony has been brutally frank. I rarely hear the level 

15 

of frankness that I have heard with your testimony. So I am grateful, as well, that you have been forthright. Now, I do have a couple 

of concerns. One, with all that you have said, I want to make it 

clear to all who are hearing your testimony that you do not contend 

that we should end FEMA. I think I am hearing you say we should 

mend it, but not end it. Is that a fair assessment? 

Mr. KIESERMAN. That is a very fair assessment, Congressman. I 

think you need a very strong National Flood Insurance Program. 

The private market does not appear ready to step in. Americans 

and businesses, small businesses need access to flood insurance, 5.3 

million Americans are doing it now and need it. I don’t know where 

they get it if we are not here. So I think we need to strengthen the 

National Flood Insurance Program. 

Mr. GREEN. Thank you. I had the opportunity this past weekend 

in Houston, Texas, to talk about FEMA and the various programs 

on a radio station. And we had a caller who appeared to be a young 

lady. Her indication was that she had paid her flood insurance regularly, wasn’t behind, there was no lapse in the program in terms 

of her payments. And she indicated that she was very much distraught, perhaps not in these words, because the program did not 

reward her as she thought it should when she had fulfilled all of 

her obligations. And I am laying this out as a predicate for this 

question. Is it true that the penalty for overpaying a victim is more 

severe than the penalty for underpaying? I am trying to find some 

rational reason for the behavior that we are talking about today. 

Can you comment please? 

Mr. KIESERMAN. Yes, Congressman. It is not the case that the 

penalty, if you will, for overpaying is more severe than the penalty 

for underpaying. The penalty is for not paying the correct amount, 

over or under. And that was not true 4 years ago. But it is true 

today, based on some changes that were done after Katrina. As far 

as what the reason is behind the conduct of engineering firms that 

alter reports or any of that, I don’t have an answer for you. It is 

really difficult to understand why. 

What I would offer to you is this: I think it is imperative that 

the system that we use to detect that kind of conduct needs to be 

strengthened. Because whatever the ‘‘why’’ is, until we understand 

the scope of it, we are not going to be able to fix it. 

Mr. GREEN. I rarely try to get an explanation for irrational behavior. But usually when fraud is involved, there is some reward 

someplace in the system. And I am trying to find that gravamen, 

if you would, that reward that is in the system. Are you indicating 

that at this point, you too have not been able to locate the reward 

that someone would receive? 

Mr. KIESERMAN. I have not. And I have brought forensic accountants in to help me. It is why I have asked GAO to come in. I have 

spoken with the Attorney General’s Office in New York, in particular, because I know they are looking at the same question. I do 

not have an answer for you because I do not understand why anybody would do some of the things that are alleged. 

Mr. GREEN. All right. Mr. Chairman, with the remainder of my 

time, I would just like to focus on Houston, Texas, and recent 

events. We have had a catastrophe. We have had much property 

damage. Lives have been lost. And it is our job, as Members of 

16 

Congress, to do all that we can to assist our constituents. But I 

also want to indicate that in Houston, I saw something that was 

very heartwarming. I saw a symbiosis develop. The mayor’s office 

was involved and the mayor herself. The Governor immediately 

acted. The Red Cross, the agency that you are going to move to— 

and, by the way, I salute you if this is what you want to do—was 

very much involved. We even had the Mormon Church providing 

translators for persons who needed some assistance. We had a Chinese community center housing people who were victims of the 

storm. I want to just commend those in Houston who have done an 

outstanding job. 

But I also want those who are still suffering to know that we 

plan to do all that we can to be of assistance to them, especially 

people who are out of their homes now and have no place to go. 

Some will, but many do not. And it is important that we do all that 

we can to help and that they not be defrauded in this time of need. 

It is exceedingly important. Mr. Chairman, I thank you so much 

for the time. And I yield back. 

Chairman LUETKEMEYER. The gentleman’s time has expired. 

With that, we go to the gentleman from Virginia, Mr. Hurt, for 5 

minutes. 

Mr. HURT. Thank you, Mr. Chairman. I thank the Chair for holding this important hearing. Mr. Kieserman, I am Robert Hurt. I 

represent Virginia’s 5th District in southern Virginia. What I hate 

to see, and I know we all agree on this, is one more reason why 

the American people don’t trust the Federal Government. And this 

is a perfect example of that. The people that I represent weren’t 

affected by Hurricane Sandy directly. But certainly, the same distrust and terrible behavior reflects and affects them much in the 

same way. 

I guess my question, just building on Mr. Green’s line of questioning though, it just seems impossible that you don’t have some 

idea what it is that would motivate these agencies of the government, the engineering firms, or the adjusters to undervalue the 

damage. There has to be some incentive that can be adjusted to get 

to that. So it is hard for me to believe that you don’t have any idea. 

Mr. KIESERMAN. Congressman, I have talked to plaintiffs’ attorneys, I have talked to judges, I have talked to insurance companies 

and adjusters and engineers whom I believe are credible, trustworthy people, and they don’t have any idea. It is— 

Mr. HURT. What could it possibly be? 

Mr. KIESERMAN. I think there are separate pieces here. Where 

the adjusting piece is concerned, there is software that all adjusters 

use. And in the NFIP, there are multiple softwares that people are 

using. One of the things that I would change as a reform is I would 

go to a single software. I don’t think you should have multiple 

types of software because they can result in different outcomes for 

different people. There should be consistency. So if there are errors 

in the software, errors in the algorithm, that can result— 

Mr. HURT. But fraud necessarily requires an intent. So if there 

is intent to defraud the policyholder—I guess my question is, is 

having software that is inconsistent, that is not intentional, necessarily intentional. It could be, I guess. But that doesn’t make 

sense to me. 

17 

Mr. KIESERMAN. No. 

Mr. HURT. All right. What about on the engineering side? There 

are these allegations that reports were doctored. What is that 

about? 

Mr. KIESERMAN. Right. So I think the best I can tell you is this 

that I do not understand why an individual at an engineering back 

office would take their report from a licensed professional engineer, 

alter it, not consult with that engineer, and then append that engineer’s signature and seal. 

Mr. HURT. Lazy? 

Mr. KIESERMAN. Lazy is one—Congressman, I will be honest with 

you, I am back to ‘‘follow the money.’’ I have to believe that somewhere, someone at some engineering company thought that they 

would either get more business if they found causation by flood less 

percent of the time, or maybe they thought they would get less 

business if they found otherwise. Maybe there is a money connection here we are just not seeing. But we haven’t seen it. 

Mr. HURT. Okay. But is that an incentive that is imposed by the 

Federal Government or by the Flood Insurance Program? 

Mr. KIESERMAN. I don’t know. And I don’t think anyone else does 

either. This is one of the reasons why these Attorney General investigations are critical. We simply do not have the facts. 

Mr. HURT. But who makes those decisions? I guess going back 

to Mr. Garrett’s question, who makes the decisions about which engineering firms that are chosen? And does efficiency or lowest 

amount of claims or dollar amount of claims—is that an incentive 

for hiring these folks? 

Mr. KIESERMAN. I don’t have any reason to believe that is the 

case. But I do—so you asked me who makes the decision. The 

Write Your Own insurance companies and FEMA’s direct side 

agent decide who to bring in for engineers. And most of the insurance companies, like FEMA, contract their work out to about nine 

vendors in the United States. So we are talking about 82 Write 

Your Owns. The reality of it is, there are about nine vendors and 

one or two companies who are doing most of the work here. And 

so what incentives do they have to hire bad engineers or to hire 

engineers who are going to defraud people? I don’t know. 

Mr. HURT. Who gets the money? That is the question. I am asking you that. 

Mr. KIESERMAN. Right. The money flows—and this is the point— 

back in layers. So the contracting firms, the vendors get money. 

The Write Your Owns get money. The engineering firms get money. 

And this is why we need to follow the money. Because here’s where 

we should be, we should be making sure that every person who has 

paid a premium and is insured and has a loss caused by the flood, 

that they get their money. That is where we should be focused 

right now. And that is where, I think, we need to make sure that 

the program is focused, to make sure that every person who has 

a loss gets every dollar to which they were entitled. 

Mr. HURT. Amen. Really quick, we only have 10 seconds, the fact 

that you have opened up 142,000 other cases, does anybody have 

any idea what that process in and of itself will cost? And are there 

concerns about that—any additional cost? 

18 

Mr. KIESERMAN. The total cost of the claims review right now I estimate at about $40 million. And that is all the costs associated 

with running it, standing up, and doing all the work, and adjudicating claims. But, Congressman, to your earlier point about public 

trust and integrity, the cost of losing that trust is far greater than 

$40 million. 

Mr. HURT. But we shouldn’t be here in the first place. 

Mr. KIESERMAN. That is right. 

Mr. HURT. All right. Thank you. I yield back. 

Chairman LUETKEMEYER. The gentleman’s time has expired. 

With that, we go to the gentleman from Massachusetts, Mr. Capuano, for 5 minutes. 

Mr. CAPUANO. Thank you, Mr. Chairman. And thank you, Mr. 

Kieserman. I think you are 100 percent right, obviously, to follow 

the money. This is a money thing. Where it is, I don’t know any 

more than you know. But I am just wondering do, engineers or 

whomever get paid by the number of parcels they review? 

Mr. KIESERMAN. In some cases, yes, Congressman, that’s the 

model. 

Mr. CAPUANO. So that the more they do, the more they get paid. 

And the more you do, the quicker you are, the less detailed you 

are. And when you bring that back to the home office to say, here 

are my 100 reports for these hours’ worth of time, if you say no, 

no one is going to tell you to go back out and check it because there 

is no payment to be made. If you say yes, and they say, hey, Fred, 

I am not so sure, maybe you ought to go check that one again, if 

we don’t get paid for it. I am not saying that is here. But there is 

clearly money involved. You are 100 percent right to chase it. 

Mr. KIESERMAN. Congressman, I think you have a great point 

there. And all I would add is that just a few weeks ago in open 

court, there was evidence introduced that the billing process, even 

though it was a parcel-by-parcel structure—they billed a flat rate. 

And that was introduced in open court. So that is being investigated as potential fraud as well. 

Mr. CAPUANO. We all look forward to the results of all that. 

Thank you. I want to talk to you about some of the bigger issues. 

There are some of us who have continued to look at the flood insurance situation, not individually Sandy, but, obviously, lessons 

learned from Sandy. But also how we keep this thing alive, how 

we improve it, how we make it work. I just have a question for you. 

If I had a home on the Jersey shore, and I ran away because I was 

told to leave, and I came back and my house was gone, do you 

think I would really care if it was swept away by the ocean tides 

or the wind or shifting sands or little mice? My house is gone. Do 

you think it should matter? 

Mr. KIESERMAN. I, Brad Kieserman, don’t think it should matter, 

Congressman. But I will tell you this, as somebody managing a 

Federal program, the actuarial difference between what it costs to 

limit causation to flood versus what it costs to deal with other 

issues is significantly different. And we are going to have to figure 

out how to manage that and how to educate the public about what 

they are buying. 

Mr. CAPUANO. I understand. The Flood Insurance Program, as 

you say in your testimony, was created for classic floods, rain and 

19 

only rain, like what is going on in Texas right now. It wasn’t necessarily created for hurricanes where there is wind and rain simultaneously. And it wasn’t created for tornadoes. 

I would argue that one of the things we need to look at is natural 

disaster insurance, as opposed to simply flood insurance, therefore, 

getting rid of all the nonsense about was it rain, was it not. We 

heard it in Katrina. We are hearing it again in Sandy. And to be 

perfectly honest, I understand the technicalities of why it has to be 

done. But from my perspective, I think it is stupid for us to require 

it; a disaster is a disaster. And whatever specific item caused your 

specific loss, in my opinion, shouldn’t matter. 

I guess I have another question. During your work, is there a difference if—I don’t live on the shore of New Jersey. You know what? 

I have a small restaurant. I open it up 6, 7, 8 months a year, try 

to make as much as I can to feed my family and send my kids to 

college. A hurricane comes along, and my business is blown away. 

Should that be treated differently than a homeowner? 

Mr. KIESERMAN. I acknowledge that there are a lot of public policy issues there. But if you are asking my opinion, my opinion is 

that if you are a small business and you have a loss, you should 

be able to get your loss adjusted and make sure that you get the 

money you need. You are the economic engine of the community. 

Why would we do anything other than treat them the same? 

Mr. CAPUANO. I would agree with you. Yet, I know you know 

that when we ‘‘fixed’’ our problem with flood insurance, we didn’t 

fix it for small businesses. 

Mr. KIESERMAN. So we are now looking at the number of small 

businesses that we have. There is a study going on right now to 

identify how many small businesses are actually in the program. 

And that will help us understand better how we can better adjust 

their claims. 

Mr. CAPUANO. And when Sandy hit did it—well, you tell me, 

again, I am not terribly familiar with the Jersey shore, but is everybody who owns a house on the Jersey shore, are they all 

wealthy? Is Donald Trump the only one who owns a house along 

the Jersey shore? Or are there some working-class people who have 

struggled hard to get maybe a small, tiny little piece of the pie? 

Mr. KIESERMAN. I met a lot of working-class people, blue-collar 

folks, and people who have worked for a long time to get their 

homes, who were impacted by that— 

Mr. CAPUANO. And some of those might be second homes. They 

actually might live in downtown Newark and have struggled to get 

a small, little piece on the Jersey shore so their family can get out 

of the city on occasion. 

Mr. KIESERMAN. That is right. 

Mr. CAPUANO. Yet, we didn’t treat them well either. They are not 

covered by the fix that we had either, is that right? 

Mr. KIESERMAN. Right. The primary residences are the main 

focus of the National Flood Insurance Program. Secondary homes 

are treated differently. I take your point about why people have 

second homes. But the public policy decision— 

Mr. CAPUANO. I know. I am struggling with the public policy, I 

am not struggling with it, I actually think this is easy. Second 

homes—Donald Trump has a second home. It is too bad if he loses 

20 

it. But I am not going to cry a lot. But that is not most people who 

own a second home. And I am sure that in your work on the Jersey 

shore, you have seen that. And I know you have seen it. I know 

you saw it in Katrina. I know you see it every time there is a disaster in areas where there are some second homes. And I guess my 

time is over. And I appreciate it. Thank you very much, Mr. 

Kieserman. 

Chairman LUETKEMEYER. The gentleman’s time has expired. 

With that, we go to the gentleman from Florida, Mr. Ross, for 5 

minutes. 

Mr. ROSS. Thank you, Mr. Chairman. And, Mr. Director, thank 

you for being here. I come from a State that is surrounded on three 

sides by water. And we are used to a little bit of flooding. And we 

are used to some wind storms. We are also a donor State to the 

National Flood Insurance Program. We probably contribute more in 

terms of premiums than we ever get back in terms of claims. And 

my concern is is that we have created this model, that we use the 

word ‘‘insurance’’ when, in fact, what we have created is a relief 

model, relief being a post-event distribution of dollars in order to 

try to correct and resolve the damage, as opposed to insurance, 

which is a pre-event, actuarially-assessed, capital-based program. 

And so now in the NFIP, as we have seen happen in Sandy and 

what we have seen in other areas throughout the country, is we 

really have a relief program. And, actuarially, I am concerned that 

we are not assessing the value of the risk. Because the risk is what 

the risk is, and you understand that. If you choose to live next to 

an ammunition factory, you don’t want to light a match. That is 

the risk of living there. If you choose to live in an area that is 

under a floodplain, there is a risk there. And so what we have to 

do is we have to somehow balance a market to make sure that we 

have a capital that will come in and bear that risk at the price that 

is appropriate. But also we have to do, from a policymaking point 

of view, what is necessary to do, what we refer to as mitigation. 

Because if it is going to be a true insurance program, then we have 

to realize that the pre-event investment is going to save us on the 

post-event contribution. In other words, studies have shown that 

for every $1 in mitigation, you receive a $3 benefit in value when 

it comes to relief. 

My question to you is, what is going on in terms of mitigation? 

Is there anything you specifically recommend that homeowners can 

do in terms of trying to mitigate against potential flood problems, 

whether it be structural improvements, whether it be waterproofing a basement, or things of that nature. 

First of all, that risk, if it is borne by the individual homeowner 

and they are aware of that risk, they are aware of the value of that 

risk, they have a tendency to want to make sure that they themselves manage that risk and protect that risk. Mitigation is the 

area. I would love your comments on that. 

Mr. KIESERMAN. I think it is critically important, whether it is 

homeowners or small businesses or public infrastructure that everyone prioritize mitigation, as you said, pre-storm and pre-event, 

because that is the way you truly buy down risk. You can either 

reduce risk, you can avoid risk or you can ignore it. We shouldn’t 

be ignoring it. 

21 

Mr. ROSS. Right. I agree. 

Mr. KIESERMAN. So in order to mitigate, if I am the homeowner, 

I can dry floodproof, I can elevate, I can look at structures to reduce flood flow into my home. Those are all measures you can take. 

Frankly, again, it is not an option for everyone, but some people 

can choose to relocate, especially if they are in a floodplain, and 

those are decisions that people have to make. 

Mr. ROSS. Has it been your experience that when people are 

incentivized financially to make mitigation improvements, they will 

do so? 

Mr. KIESERMAN. Sometimes, but there is more than just irrational actors involved in this. There is emotion involved. As the 

Congressman from New Jersey said earlier, sometimes people work 

their whole life and that is their parcel and they are not going to 

leave it. And so, I think it is both. 

Mr. ROSS. I agree. But if given that emotional feeling, you would 

want to protect it and part of that protection is knowing that you 

have been incentivized to mitigate against them. For example, 

whether I have a tax-free savings account that I can use solely to 

put in that waterproof basement or put up those berms to keep 

from— 

Mr. KIESERMAN. Right. 

Mr. ROSS. Those would be good options, would they not? 

Mr. KIESERMAN. I think they would be good options that are 

worth considering, along with the fact that to the extent that we 

can help people make good mitigation decisions, we can help educate people about how they can mitigate the risk and buy it down 

and how they protect their investment. That’s a role all of us can 

play, including the banking industry and others. 

Mr. ROSS. The housing industry, the banking industry, everybody. 

Mr. KIESERMAN. Yes. 

Mr. ROSS. I think this isn’t just solely a government responsibility. 

Let me ask you also, when we did the fix last year to the BiggertWaters bill, we put a provision in there, I believe, that would allow 

for the disclosure of publishing of the science or the actuarial analysis that is being done. Has any of that been disclosed or has any 

of it even been requested by anybody on the outside? 

Mr. KIESERMAN. I don’t know if the disclosures have been done. 

We will get that for you. There are a number of studies going on, 

on the actuarial soundness of the NFIP. But the reality of it is, this 

is a subsidized product. And I agree with everything you said prior 

about this being a hybrid between disaster assistance as a relief 

program and an insurance program. It is not pure insurance. It is 

not actuarially sound, and frankly, I don’t think it will be. If it 

were actuarially sound, the private industry would sell it. 

Mr. ROSS. And we should get the privacy industry in there, and 

if we can let them assess that risk because there is opportunity for 

that capital to be there. 

Mr. KIESERMAN. Yes, I agree. There is potential here, especially 

as we look at reform at a layered approach. It doesn’t just have to 

be the National Flood Insurance Program. I think there are opportunities out there for reinsurance and other layers so that people 

22 

can buy down their risk with private products, and that this product is really the last line of defense not the first. 

Mr. ROSS. Exactly. The market of last resort. My time is up. 

Thank you very much. 

Mr. KIESERMAN. Thank you, Congressman. 

Chairman LUETKEMEYER. I thank the gentleman. That was an 

interesting line of questioning. I enjoyed that. Very good, Mr. Ross. 

With that, we go to the gentlelady from Ohio, Mrs. Beatty, for 

5 minutes. 

Mrs. BEATTY. Thank you, Mr. Chairman, and I thank our ranking member, as well. 

Let me say to the witness, thank you. Usually, around here, it 

is bad news that travels fast about a witness. But I got a call saying we have a good witness, and both sides are saying that. So I 

expect you to carry that knowledge to your next position when you 

leave. 

We have heard a lot about the situation here and we have also 

heard a lot about FEMA. So my question is, FEMA has asked the 

Inspector General to make recommendations to help improve its 

oversight role. Can you shed any light or share with us, are there 

any efforts to improve that role currently, or will FEMA take any 

actions on its own in the interim? 

Mr. KIESERMAN. Congresswoman, we have established a task 

force at FEMA that I have had the honor to lead for the last 100 

or so days. Mr. Wright will be taking over the overall operation 

here in a few weeks. 

One of the three things the task force is doing is working nearterm reform. We are not going to wait for others. We are going to 

move forward. We would like to move with our partners, but we 

know that there is a sense of urgency here and that we have to 

maintain that. One of the challenges that we have is that we have 

75 Federal employees trying to oversee an enterprise of what really 

amounts to 6 million people when you take into account the 5.3 

million policyholders. 

So some of the things we can do, and I would just raise for Congressman Green from Texas, I do intend to establish before I leave 

this job a hotline so that your constituents and others who may be 

affected by floods this season can call us until we have a more robust network that allows us to detect and monitor these potentially 

systemic problems. I want to make sure people have a place to go 

before they have to appeal their claim to their insurance company, 

before they have to sue. We will have that established before I 

leave office here in the next week-and-a-half. So that will be the 

first thing that we do. 

We are going to work with our Write Your Own companies and 

others to see how we can better structure our oversight. We have 

withdrawn on their authority to pay for engineering services without our preapproval. That will help us do a better job at screening 

the engineering companies. We are going to immediately increase 

our policyholder education so that people understand what they 

bought. That is one of the things I have seen, Congresswoman, is 

that people are very surprised at times of loss because they don’t 

really know what they bought. We need to work that piece. 

23 

Adjustor training. The adjusters that we have brought in for the 

claims review process have received very special training. We are 

going to expand that to all adjusters over the course of the next 

year or so, so that all the adjusters can get the sort of training that 

we have that makes them more sensitive to the needs of survivors. 

That is just a few of the things that we will be doing. The reform 

team has come up with well over 50 ideas that I am sure Mr. 

Wright and I will be talking about over dinner on Sunday night. 

Mrs. BEATTY. Thank you so much. 

Mr. Chairman, I yield back. If Mr. Cleaver needs some of my 

time, I would be willing to give him those minutes. 

Chairman LUETKEMEYER. We will recognize the gentleman from 

Missouri. 

Mr. CLEAVER. Thank you. Thank you, Mrs. Beatty. 

My concern is, a lot of it is the fact that FEMA is apparently 

going to open up 144,000 claims and that is very close to, if not the 

same as, the number of claims originally filed, although only 2,800 

were appealed—2,800 of those claims that were filed were appealed. What precedent will you be setting for the storms of the future, and is this a corrective step? 

Mr. KIESERMAN. Congressman, this is a corrective step. It recognizes that there were deficiencies in the delivery of the program. 

So, I think two things have to happen: one, you have to provide redress for that now; and two, you have to correct the system going 

forward so that this doesn’t happen again and you don’t have to 

provide that type of redress. 

And just to clarify, we are providing everyone who was impacted 

by the storm and filed a claim with the opportunity to have their 

claim reviewed, it is their choice to opt in. Some people have gotten 

what they needed. Some people are fatigued by this and are just 

done with government, and that is fine. Some people got money 

from SBA or got money from HUD and their needs were met. 

This is really for people who believe they were underpaid and 

didn’t have a form of redress. If you are litigating, you are not eligible for the process. If you had an appeal and it was closed, unless 

we can find wrongdoing, you won’t be eligible for the services. 

Mr. CLEAVER. We had a problem with Wall Street. They intentionally, the word was mentioned, committed fraud. Nobody has 

gone to jail. Nobody has even gone on trial for almost sending this 

Nation into another depression. Do you have any feeling about 

what will happen if we can prove without a doubt that insurance 

companies were committing fraud? Will someone be prosecuted? 

Will there be prosecutions, like if they robbed 7-Eleven? 

Mr. KIESERMAN. I have no doubt that there will be prosecutions 

if there was evidence of that. But I will tell you, Congressman, that 

I think what you are going to see is evidence of subordinate entities doing that activity, not insurance companies. We will see. 

Chairman LUETKEMEYER. Time has expired. 

With that, we go to the gentleman from Pennsylvania, Mr. 

Rothfus, for 5 minutes. 

Mr. ROTHFUS. Thank you, Mr. Chairman. 

And I would like to pick up on a little bit of that line of questioning and also follow up on what Mr. Hurt was saying. Because 

I am still trying to get my arms around incentives that might be 

24 

out there. And maybe if we could talk a little about the transaction 

that happens for the homeowner. Who is the homeowner going to 

interact with in the process? 

Mr. KIESERMAN. Congressman, in the review process or— 

Mr. ROTHFUS. When the claim gets filed. 

Mr. KIESERMAN. Right. So the first thing a homeowner does is 

that they call their agent and they say, I have had a loss. And then 

what happens next is the agent works with the homeowner and the 

insurance company to send an adjuster out. So that adjuster is the 

center of gravity for all of this. That is first contact, meaningful 

contact with an insurer. 

Mr. ROTHFUS. And the adjuster then sends out the engineer? 

Mr. KIESERMAN. The adjuster will call for an engineer if there is 

an issue with respect to causation of structural damage. Adjusters 

are not trained generally to assess structural damage. And so if 

they see that, they will bring an engineer in to say, hey, did the 

flood cause the damage, it is a— 

Mr. ROTHFUS. So the engineer comes out, does a study, then 

somebody back at the office somehow changes that study or the 

evaluation? 

Mr. KIESERMAN. Certainly those are the allegations of what occurred in Sandy, and I have seen evidence that that happened on 

multiple occasions. Should that happen? What I am told by professional engineering firms is that the notion of peer review doesn’t 

involve the change in real time of reports. It involves a later look 

for QA, for quality assurance and quality control. It is not what has 

been alleged to have happened in Sandy. 

Mr. ROTHFUS. These engineers are licensed in a particular State? 

Mr. KIESERMAN. That is a great question. In Sandy, some of the 

engineers who performed functions were not licensed in the State 

where they were working. Some of the engineers who reviewed in 

the back office were not licensed in the State where the residence 

was located. And some engineers weren’t licensed at all. In fact, 

some of the people doing this were biology majors. 

Mr. ROTHFUS. Are the processes that were followed in Sandy typical for how other claims will come in for NFIP? 

Mr. KIESERMAN. I don’t know the answer to that, sir, because if 

we knew the answer, we would have prevented this up until now, 

which is why we are putting some of these measures in place in 

Texas and elsewhere so this doesn’t happen again. 

Mr. ROTHFUS. Has FEMA’s Inspector General been engaged to 

review this matter at all? 

Mr. KIESERMAN. Yes. 

Mr. ROTHFUS. What is the scope of that review? 

Mr. KIESERMAN. Sir, I think you have to ask the Inspector General, given their independence, but within the first week of taking 

the job I put a full referral package together. And I will just add 

that I met with plaintiffs’ attorneys, the lead plaintiffs’ counsel in 

this case. He was very generous in giving us information about his 

cases that we shared with the Inspector General and with the 

State’s attorney in New York and New Jersey, so that they don’t 

have to spend time reinventing the wheel on the investigation. 

25 

Mr. ROTHFUS. In the claims process, what interaction is there between WYO, an engineer, an adjuster, and any individual at 

FEMA? 

Mr. KIESERMAN. Minimal, and it varies from Write Your Own to 

Write Your Own. Some of them use different models in terms of the 

services they buy from vendors. In some cases they get complete 

service from a vendor and they have minimal interaction. FEMA’s 

first interaction in most cases with an insured is in the appeals 

process when the insurance company has denied a claim and an insured comes to us. And as I said in Sandy that happened— 

Mr. ROTHFUS. Do you know whether the Inspector General is 

asking or has asked for information from FEMA employees who 

may have any information about what happened prior to an appeal? 

Mr. KIESERMAN. I do not know the answer to that. 

Mr. ROTHFUS. In your testimony, you stated that NFIP has no 

consistent or reliable method to identify systemic problems, preemptively identify and address claims or appeals with similar adjustment issues, or recognize patterns from warning signs by policyholder complaints, congressional correspondence, appeals, and 

other data. What is being done about that? 

Mr. KIESERMAN. Several things. So to begin with, we are putting 

significant resources on bringing in the information technology that 

we would need. I am sure within the next year we will be setting 

a standard for data collection, this next year or 2 years a standard 

for data collection, so that insurance companies and others give us 

a standard that we can work through. We will set up this hotline 

so that we have the ability now to connect the dots and sort of 

clear the signal-to-noise ratio, which has been a problem. 

But I think the real focus here is going to have to be the development of a customer service unit that focuses on the customer. And 

whether that is a combination of secret shopper or customer interviews, we cannot rely on adjusters and WYOs or anyone else to be 

assessing the services the customer is getting. We have an obligation to assess the customer service. 

Mr. ROTHFUS. Thank you. I yield back. 

Chairman LUETKEMEYER. I thank the gentleman. 

We will now go to the ranking member of the full Financial Services Committee, Ms. Waters from California, for 5 minutes. 

Ms. WATERS. Thank you very much. 

I am sorry that I was not able to be here at the same time that 

Chairman Hensarling was here, because first of all, I would like to 

express my deep concern about what is going on in Texas and inquire about what is being done to make sure that the citizens are 

being taken care of and that bodies are being located that may not 

have yet been identified as lost. 

But I would like to ask Mr. Kieserman here today, have you had 

an opportunity to talk with our chairman, to explain to him what 

you know about what has happened in Texas and how severe that 

is? 

Mr. KIESERMAN. No, Congresswoman, I have not had that opportunity. 

Ms. WATERS. Perhaps he has not had the time to make that call 

to you, but I would ask you if you would offer yourself to the chairVerDate Nov 24 2008 18:54 Dec 07, 2015 Jkt 096989 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 K:\DOCS\96989.TXT TERI
26 

man to explain to him exactly how devastating the storms have 

been in Texas, and what it is going to take to compensate those 

who have been displaced, whose homes have been destroyed, on 

and on and on. 

I think it is very important. You may know that during the time 

that we were involved with the reauthorization of the National 

Flood Insurance Program, perhaps the chairman did not feel that 

we needed to reauthorize that program. And I am not asking you 

to convince him of anything. I am just asking you to share with 

him exactly what has taken place in Texas. This may cause him 

to rethink what he feels about the National Flood Insurance Program. So I appreciate that. 

Now, having said that, the NFIP is in the red with a staggering 

debt of $24 billion. Most people assume that is because of subsidies 

written into the program, but historically, the program had been 

self-sufficient. I believe we should be taking a close look at the administrative cost of the program. 

And I would like to ask, to what extent has FEMA revised its 

WYO compensation practices to address concerns identified in prior 

GAO reports? For example, a 2009 GAO report found that FEMA 

consistently overpays WYOs for operating expenses. The WYOs 

currently receive 30 percent of premiums just for operating expenses yet they hold none of the risk. So what, if any, is your 

timeline for better aligning the cost and expenses of the WYO program? 

Mr. KIESERMAN. Congresswoman, we have literally just met in 

the last week or so with GAO, who are now opening a very specific 

engagement on WYO compensation. And we gave them a substantial amount of input about our concerns, some of which we shared 

with you about the compensation framework. 

I would offer just two points, if I might. First, I respectfully disagree that WYOs don’t share in the risk. While it is true that they 

don’t financially share in terms of the pool of money from which 

claims are paid, I think if you asked any of the 25 or 27 or so companies that are in litigation in New York and New Jersey today, 

they would tell you they share considerably with respect to 

reputational harm. 

And frankly, I want them to share in that risk with FEMA and 

with the government. That is what we need in our partners regardless of whether they are contractors or Federal entities. And many 

of those Write Your Owns, Congresswoman, have, in fact, stepped 

up now that the evidence is becoming clearer. Some still need some 

additional persuasion. 

The other point that I would make with you is that 30 percent, 

while it sounds like a large number, when you look at the industrywide standard for overhead, it is not that far out. I believe we can 

get that number down and get service up, but I do want to put that 

in context. So I think our goal needs to be working with GAO and 

working with the Write Your Owns to cut layers out of this that 

we don’t need 32 years into the program. 

We may end up reducing the number of WYOs or changing the 

structure of that, but there are ways for us to reduce costs while 

still increasing services, and I want to work with GAO and our 

27 

partners to do that. And I know Mr. Wright is committed to that 

as well. 

Ms. WATERS. Thank you very much. This is not in my notes for 

today, but it has been in my head for a long time. Because I am 

so concerned about the premium costs of this insurance to our constituents, I would love to forgive the whole $24 billion, wipe it out. 

I know that is an unrealistic wish, perhaps, but what do you think 

about a bold idea like that? 

Mr. KIESERMAN. Without getting myself in too much trouble 10 

days before I leave Federal service, what I would say is this: This 

is not an actuarially sound program, and it was never designed to 

be. If a program could be delivered in an actuarially sound way, 

private industry would have taken care of it, and we wouldn’t be 

involved. 

The notion that there is $23 billion in debt, as you said when you 

began, the Write Your Own program and the NFIP generally have 

run solvent with the exception of 9 years out of about 34 years. 

And one of those is Katrina. And I will just leave with this comment: The NFIP was as much a victim of Katrina as everyone else 

who was a victim of Katrina. It literally blew us out of the water. 

Ms. WATERS. Thank you very much. I yield back the balance of 

my time. 

Chairman LUETKEMEYER. The gentlelady’s time has expired. 

With that, I recognize the gentleman from Texas, Mr. Williams, 

for 5 minutes. 

Mr. WILLIAMS. Thank you, Mr. Chairman. 

And thank you, Mr. Kieserman, for your testimony today. 

As you can imagine—well, first of all, I am from Texas. And 

Wimberley, Texas, is in my district. And you are very familiar with 

that. So as you can imagine, we are feeling for our fellow Texans 

as they are experiencing historic flooding, and this hearing to me 

is very timely. 

As you said in your testimony today, millions of Americans are 

physically and financially vulnerable to floods. A week’s worth of 

flooding in my district, quite frankly, has brought that statement 

very close to home. As you probably know, the President just recently approved Governor Abbott’s request for a major disaster declaration just last week; he approved it very quickly. The residents 

in Hays County, Texas, in my 25th district, which I represent, are 

beginning that process. 

Now, it goes without saying that I have a vested interest to make 

sure we get it right and that we fix the problems we have discussed 

this afternoon. I will tell you, shortly after this, I called your 

FEMA office and talked to the regional director. He was very much 

on top of the job. He got with us. They were on the ground, and 

I appreciated that very much and I have made that public. 

So I guess I would say my first question to you is, you mentioned, of course, that we have 142,000 claims which you are reopening. And you said that is approximately $40 million, is that 

right? 

Mr. KIESERMAN. That will be the cost to do the work. That is not 

necessarily the outflows of policy— 

Mr. WILLIAMS. Okay. Now, what does that do to your budget? 

28 

Mr. KIESERMAN. There is no impact, Congressman, on our borrowing authority or our cash on hand. We have sufficient funds 

available on hand without having to borrow additional funds. 

Mr. WILLIAMS. But Sandy did strain your resources? 

Mr. KIESERMAN. Sandy did constrain our resources, yes. 

Mr. WILLIAMS. All right. So when I go back home to Texas, you 

are going to have plenty of room to help my Texans get done what 

needs to be done, right? 

Mr. KIESERMAN. We have sufficient funding available right now 

to deal with the disasters in Texas and Oklahoma and elsewhere. 

And I would also just point out that we did extend the period to 

file proof of loss by an additional 6 months to give people space and 

time to do that. We know it is going to take them time to get back 

into their homes, and it is going to take time to find all the damage. So they will have now up to 240 days in order to file their 

proof of loss, and that should help. 

Mr. WILLIAMS. All right. Next question is, you have talked about 

reforms and the reforms you are doing now to make things better. 

And you talked in pretty good depth about that. Is it safe to say 

that all the reforms you talked about that you are making, that 

you talked about making today, will my constituents in Texas 

begin to see it tomorrow? 

Mr. KIESERMAN. I think that your constituents in Texas can 

count on the fact that we are hyper attentive to what is happening 

in Texas and Oklahoma and flooding this year because of what we 

have seen happen in Sandy; Mr. Wright and I and the leaders in 

our team are hyper attentive to this. That is why we are going to 

establish a hotline, that is why we have extended the proof of loss, 

and that is why we are going to be watching very closely on the 

ground from Washington in working with our Write Your Owns to 

reduce any sort of risk that this could happen again. 

Mr. WILLIAMS. So we have learned from the past, and we can be 

reassured that what we are talking about today won’t happen 

again in Texas and Oklahoma? 

Mr. KIESERMAN. We are going to take every step we can, Congressman, to prevent that from happening. 

Mr. WILLIAMS. Because we have already had 5,000 claims in a 

short period of time, and you know there are going to be a lot more. 

So we really want to get it right. 

Mr. KIESERMAN. We do. 

Mr. WILLIAMS. I come from a retail background, and I think it 

is important that you—and I told your guys this when we talked 

last week that, please understand, these people are customers. 

They are customers. And they need to be treated as such. And they 

deserve good, they deserve on-time service with very few hassles. 

And I hope all of your folks will understand that. 

Thank retail and give them the opportunity to realize the benefits that they have coming to them and begin to get their lives 

back. Texans are resilient people and they just kind of need to 

know the rules. But I hope we have remembered from what has 

happened so we won’t see this happen again. But I do thank you 

for your service, and I will look forward to working with your agency as we move forward to fix our needs back home in Texas. 

Mr. Chairman, I yield back. 

29 

Chairman LUETKEMEYER. The gentleman yields back. 

With that, we recognize the gentleman from Kentucky, Mr. Barr, 

for 5 minutes. 

Mr. BARR. Thank you, Mr. Chairman. And Mr. Kieserman, thank 

you for your testimony here today, and thank you for your forthrightness in acknowledging that there is a problem with the National Flood Insurance Program. I, too, saw the 60 Minutes spot 

with your interview and with the really sad and tragic story of the 

victims of the mismanagement with the program. And obviously, 

the stories that were told in that 60 Minutes spot and some of the 

testimony that you are offering here today demonstrate that the 

program does indeed need reform, there are governance issues, and 

there is a lost capacity to monitor some of these insurance carriers 

and the engineering firms that made some egregious, egregious errors. 

In that interview that you had with 60 Minutes, one of the points 

you made was that you had seen evidence of fraudulent reports 

and criminal activity by unlicensed engineers in August of 2013. I 

know you came in after that, but you saw that as soon as you came 

into your position of authority with the agency and that was why 

you referred the matter to the Inspector General. 

My question to you is, when do you believe evidence was available to your predecessors at FEMA that there was a problem? You 

indicated that there were signals in August, in late 2013. When 

were your predecessors made aware of the signals, or even worse, 

the actual evidence of misconduct by partnering insurance companies and engineering firms? 

Mr. KIESERMAN. Congressman, I think members of the staff had 

information in their possession by October, November of 2013, so 

one year after Sandy struck, that would have led a reasonable person to conclude that there was at a minimum, irregular activity 

going on that warranted investigation. We did not act on that. I 

don’t know that my predecessors were ever briefed on that. In fact, 

I don’t think they were. 

It is one of the reasons that I think I need to reform that particular part of the program, because it is often the first time we 

touch the customer, that we have customer contact, and we have 

to get it right. And we didn’t get it right. 

Mr. BARR. Okay. And the Inspector General, have there been 

findings issued yet? 

Mr. KIESERMAN. The Inspector General received a referral from 

FEMA after a Senate hearing in July of 2014. The criminal side 

declined to investigate. The programmatic audit side opened up an 

audit investigation. In defense of anyone who declined to investigate, I have to tell you, I don’t think that all the pieces were 

clear. I think there was a high level of noise to the signal. There 

were lots of other things going on in the system until plaintiffs’ attorneys really began to marshal the facts and do their jobs in court 

in New York and New Jersey. 

And frankly, when the plaintiffs’ attorneys did that, it became 

very evident what was happening. And so we ended up relying on 

the courts and plaintiffs’ attorneys and judges. 

Mr. BARR. What is the current liability of the NFIP? Is it $23 billion? 

30 

Mr. KIESERMAN. It is $23 billion currently in actuarial debt. 

Mr. BARR. So there is enormous pressure on this, as you concede, 

an actuarially unsound and designed to be actuarially unsound 

Flood Insurance Program. 

Mr. KIESERMAN. Right. 

Mr. BARR. But there is enormous pressure to deal with that liability at the agency. So my question to you is, is there any evidence, to your knowledge, that FEMA is responsible for pressuring 

the engineering firms or the insurance companies to cram down 

these claims? 

Mr. KIESERMAN. I haven’t seen a shred of evidence of that, Congressman. Not a shred. 

Mr. BARR. Okay. Part of the problem, and by the way, the seventh vote that I cast as a Member of Congress in January of 2013 

was whether or not we were going to raise the borrowing limit for 

the National Flood Insurance Program in the aftermath of 

Superstorm Sandy. 

And one of the problems that many of us had with simply raising 

the borrowing limit without reforms was that you create this pressure at the agency to not pay claims that people are entitled to. 

Perhaps we need to reform the program so that there is a little bit 

of better pricing involved so that you don’t have this pressure at 

the agency to deal with that issue. 

My question to you is, why would you not entertain reforming 

the program so that there would be better pricing of the risk? 

Mr. KIESERMAN. I think it is a balance between properly pricing 

the risk and making sure that it is affordable, because if people 

can’t buy it and they can’t get policies, then we have no revenue 

to pay claims. So, it is a little bit of a catch-22. 

I think in the end, it really does come down to fully understanding the risk, which is the importance of mapping and the 

other programs to do risk identification, and then figuring out how 

do you get to a price that people can afford that properly balances 

the risk. This goes to the layers that private insurance can provide. 

Mr. BARR. My time has expired, but if you are not properly pricing the risk, you are subsidizing risky building. 

Mr. KIESERMAN. I would say that you are not properly pricing 

the risk. You are, in one case, dealing with people being able to afford it but then you have to look at the balance of whether you are 

subsidizing other risk. I agree with you. It is a public policy balance issue. 

Mr. BARR. My time has expired. I yield back. 

Chairman LUETKEMEYER. The time of the gentleman has expired. 

With that, we recognize the gentleman from Ohio, Mr. Stivers, 

for 5 minutes. 

Mr. STIVERS. Thank you very much. 

I certainly appreciate you being here, Mr. Kieserman, and I know 

your days are kind of numbered at this point, and I appreciate your 

forthrightness, especially with regard to the third point in your policy about reforms. I appreciated your forthrightness there and in 

answering Mr. Ross’ questions from Florida about the status of the 

program, and clearly it is not actuarially sound. 

There is clear, adverse selection in flood insurance because the 

only people who buy flood insurance are people who are guaranteed 

31 

to file a claim at some point. Instead of spreading risk around, we 

spread the plate around, and there is never enough money and the 

taxpayers end up subsidizing. And that is always going to be somewhat the nature of the program; I understand that. 

But I want to focus on your reform efforts, because I think there 

is a way to be more efficient, to actually manage the risk better. 

And I know you have been working on it for a while. I am curious 

if Mr. Wright has been engaged in these efforts, because frankly, 

some of the things you talked about, about reinsurance, and making sure that the Flood Insurance Program has some private sector 

engagement on pricing that I think will help everybody understand 

what the true risk is and help as you do that delicate balance of 

pricing to ensure accessibility, while also making sure that we 

charge as close to an appropriate amount as we can. 

So I guess my question is, has Mr. Wright been involved? 

Mr. KIESERMAN. Congressman, Mr. Wright has been involved, 

and I have to say that in addition to being my colleague and my 

friend, he has one of the highest degrees of business acumen in a 

government executive that I have ever encountered. He has been 

the Deputy Associate Administrator for Mitigation now for several 

years, and he has been involved in the National Flood Insurance 

Program in all of its aspects for several years. 

He also has at his disposal now a nearly 100-person task force, 

about a quarter of which is focused on reform, and that is all they 

come to work to do every day is to analyze this program and develop reform. Mr. Wright is probably the most capable person to 

drive this forward. He is far more capable in that area than I am. 

All I do is fix things that are broken. I am not very good at long 

term. 

Mr. STIVERS. This thing is broken and needs to be fixed. 

Mr. KIESERMAN. And he will do that. 

Mr. STIVERS. I wish you would be around a little bit longer. 

But the other concern I have is, if we don’t step up our premiums 

quickly enough, it does not give incentives for the State and local 

governments to change their building standards and where they 

build. Because if we heavily subsidize through taxpayer subsidies, 

coastal properties or risky properties, I should say, because they 

are not all coastal, where we shouldn’t be building, then we don’t 

fix the real problem. 

The real problem is we have some things built in high-risk areas 

that frankly shouldn’t be built. And I will single out one State in 

one area; Ward 9 in New Orleans probably should not have been 

rebuilt. 

Mr. KIESERMAN. Congressman, Mr. Wright has been instrumental in leading the effort to develop a Federal risk management 

standard for flooding, which has been implemented through Executive Order. It will affect Federal investment as opposed to State 

and local-only investment. But that is leadership by example, and 

it is a way to ensure that we are putting in money in ways that 

mitigate risk and don’t have us repeating this over and over again. 

Mr. STIVERS. Which is helpful, and it is a start of what we need 

to do. But if we raise the premium to a number closer to the actuarial standard and what the real cost of the risk is, then it would 

discourage people from rebuilding in some areas where they 

32 

shouldn’t rebuild. And I would like to encourage you, while I don’t 

want to kick people out of their ancestral home, if their ancestral 

home is 3 feet below sea level and there is an ocean right there, 

that is a problem. 

Mr. KIESERMAN. I appreciate that, Congressman. 

Mr. STIVERS. So if we can work with you on any of the legislative 

changes, Mr. Wright, that need to be made— 

Mr. KIESERMAN. Absolutely. 

Mr. STIVERS. And I know a lot of things that you need to do will 

require legislative language. It does not require legislative language to train your adjusters and agents better or to align your 

management at litigation better, which I think can help the process 

along. It also probably does not—I don’t think it requires legislation to require certification of your engineering firms that are filing 

reports, some of whom might have done so fraudulently. 

So I think there are a lot of things you have latitude to do to fix 

your processes, but to the extent that you need any legislation, my 

staff and I would love to help. I know there are other Members who 

are taking leadership roles already, but I am happy to help any 

way I can. And I just wanted to say that really for Mr. Wright’s 

benefit. 

And I wanted to tell you, Mr. Kieserman, good luck at the American Red Cross. I am sure you will do a great job there. That is 

a very important organization. And as a soldier who gets to see 

some of their notifications and what they do with blood and other 

things, I really appreciate what they do there as well as the natural disaster piece. So thank you for that. 

And my time is up. 

Mr. KIESERMAN. Thank you, Congressman. 

Mr. STIVERS. And I yield back. 

Chairman LUETKEMEYER. The gentleman yields back. 

We will now go to the gentleman from New Mexico, Mr. Pearce, 

for 5 minutes. 

Mr. PEARCE. Thank you, Mr. Chairman. 

Mr. Kieserman, I appreciate your testimony, especially with the 

straightforward approach you take to explaining the problems that 

the agency faces. 

As I was listening to Mr. Ross describing that Florida is surrounded on three sides by water, I realized that New Mexico is surrounded by water too. We have about 2,000 miles of buffer on the 

east side, and about 1,000 miles of buffer on the west side, Central 

America, Mexico, and Texas to the south of us, but other than that, 

we are surrounded by water. 

The problem that I have is that as we found the problems of 

Katrina, then we begin to raise the rates on people in New Mexico 

and so we went first to, I think, from a 250-year event to a 500- 

year and a 1,000-year event. Who makes the choice to do that? 

Mr. KIESERMAN. The rate structure is established in part in legislation and then in part by the actuarial structure of the program. 

So particularly after the legislation of the last several years, there 

is a mandatory rate structure that we have to follow. 

Mr. PEARCE. But who decides the flood event rather than— 

Mr. KIESERMAN. I’m sorry? 

33 

Mr. PEARCE. Who decides the flood event rather than increased 

premiums? 

Mr. KIESERMAN. That is a process of mapping, and the way that 

we assess risk is by creating flood maps. And FEMA is responsible 

for the creation of flood maps with the participation, the very active participation of communities to help them understand their 

risk. 

Mr. PEARCE. Okay. But then the agency—is it the National Flood 

Insurance Program that eventually decides that they are going to 

go with those flood maps or not? 

Mr. KIESERMAN. Yes, that is correct. And the community is a 

part of that as well. 

Mr. PEARCE. Just be aware that I have a constituent who lives 

7,000 feet above main sea level on a mountain, 3,000 feet above the 

little stream that is about as big as the pencil here running down, 

way down there, and he has to pay flood insurance because he is 

in the 1,000-year event level. 

So we are charging people who live on the top of a mountain in 

New Mexico, where the last time it rained was during that NOAA 

event, so we are charging them so that the people on the coast can 

rebuild houses that have been destroyed before at less-than-market 

value. And that is the problem. The average wage in our district 

is about $31,000, so we are taking from people making $31,000 a 

year in order to subsidize people with oceanfront property and that 

is a problem. And I don’t think that it is going to change, because 

I think your agency is, frankly, going to do the same thing regardless of if you are there or not. 

I was interested in your answers to Mr. Williams. You said you 

are going to watch very closely to reduce the risk in Texas. Does 

that mean you are going to audit the vendor? You are going to review the engineering reports? What? What are you going to do differently? 

Mr. KIESERMAN. We are going to put an audit regime into place 

in near realtime so that we—and, of course, you need to understand the flow of events. Everything doesn’t happen on day one. 

Many people won’t even file a claim for another 3 or 4 or 5 months, 

and that is one of the reasons why we have extended the period 

for proof of loss. 

So this program has a habit of sometimes using the phrase—it 

is probably inappropriate here, and my staff is probably cringing— 

it is a little bit of the pig in the belly of the snake, right. And it 

takes a while for these pieces to move through and then suddenly 

it pops up later on and it is all but forgotten in the media, but then 

we have problems. 

I want to get in there early now. I want to take a look at what 

is going on. I want to make sure we are monitoring the flow of 

claims, monitoring the process of engineering, do secret shopper 

and check with people and see how that is working and create this 

hotline. I think that combination of audit interventions will help us 

significantly reduce the risk of any improper conduct or wrongdoing, along with alerting our Write Your Owns, which we have 

done through a bulletin to what our expectations are with respect 

to adjustment of claims and engineering. 

34 

Mr. PEARCE. You had mentioned then in answer to a previous 

question that one of the problems in Sandy was—and then you listed a series of problems with the engineers, and one was that they 

weren’t licensed in the State in which they were operating. Now, 

that may be a technicality, but have you figured out that those people who weren’t registered were a source of the problem? 

Because what I typically see as bureaucracies find a reason and 

just something to say, okay, okay, we have found the reason and 

let’s go on. I suspect that if they are licensed engineers, if they 

weren’t corrupt, that their stuff may have been somewhat correct. 

It may not have been perfect. Did you drill down on that at all? 

Mr. KIESERMAN. We have drilled down on that some, and I can 

tell you that at least in the case of one of the engineering firms 

that had a substantial part of the business, the individual who 

changed the report and then affixed the seal— 

Mr. PEARCE. That is not a matter of being registered in another 

State. That is a matter of corruption. 

Mr. KIESERMAN. That is certainly a matter of not being licensed 

at all. I agree. 

Mr. PEARCE. Have you gone back in the history of any of these 

people who have had problems, submitted previous reports 5, 10, 

15 years ago? Are you checking that far back on the people with 

problems? 

Mr. KIESERMAN. We are not checking that far back on people 

with problems. And I don’t know whether the States’ attorneys 

general are checking that far back on people with problems. One 

of the things we are doing is looking at people who had their claims 

adjusted with Irene or Lee just a year before Sandy to see whether 

adjusters or engineers came in at that point and identified preexisting damage. If there was no preexisting damage a year before, 

it is a little difficult to believe there was some new long-term preexisting damage that was discovered. 

Mr. PEARCE. Yes, at the end of the day, people have to implement changes, and that I am a little bit worried about. But I do 

appreciate your approach, and I appreciate your service. 

Thank you, Mr. Chairman. 

Chairman LUETKEMEYER. The gentleman’s time has expired. 

With that, we will recognize the gentleman from New York, Mr. 

Meeks, for 5 minutes. 

Mr. MEEKS. Thank you, Mr. Chairman. 

Thank you, Mr. Kieserman. And I apologize; I was running 

around. It has been a busy day. But I represent the Fifth Congressional District in New York, which is basically the Rockaways in 

Jamaica Bay which was really devastated by Hurricane Sandy. 

And so I want to make sure I have the procedures and everything 

down because last month, a number of individuals in my constituency began to receive mail from the postal service informing them 

about the review process dealing with some of the claims of underpayment and fraud. 

So first, I just want to make sure that I am absolutely clear on 

what the process is. As I understand it, the homeowners who feel 

that they were, that they under settled, will get a 1–800 number 

that they will call to request a review, and a caseworker, I think, 

will be assigned to them to complete the file and that takes 30 to 

35 

45 days. And then it will be sent to an adjuster, who will then contact the policyholder within the next 7 to 10 days, and that puts 

us at 55 to 60 days out when there should be some kind of correspondence there, I guess. 

And then a final decision with payment will be made in the next 

7 to 21 days after the adjuster submits findings and determines the 

constituent is either eligible for additional payment or out of riders. 

Is that correct? 

Mr. KIESERMAN. Congressman, that is mostly correct, with just 

a couple of adjustments, no pun intended, if you would. The caseworker who will be assigned will be an NFIP-certified adjuster who 

has been specially trained by our program. So the caseworker is 

the adjuster. There is not another layer in there. 

In terms of how long it will take to process claims, cycle time will 

depend on input. So right now, we are receiving about 300 to 400 

calls and emails a day, that is not just the 1–866 number people 

can call, that is on the Web page. They can also go online and they 

can register online and then we call them and collect the information and ensure they are eligible. 

No one should be in the process for more than 90 days. Our target will be to have a significantly lower turnaround time, but it will 

depend on cycle time and complexity of the issue. But otherwise, 

I think you got that pretty much right, sir. 

Mr. MEEKS. And there are already resources, because sometimes 

you get these things set aside because it could be over 142,000 letters, from my understanding, in potential cases. So have resources 

already been set aside so that we can make those timeframes and 

have the appropriate individuals who are going to do the inspections—are those resources all there? 

Mr. KIESERMAN. Yes, Congressman. So 95,000 letters have gone 

out as of today. We will send out another 40,000 or so out over the 

next 2 weeks. By June 11th, all the letters will be out. People don’t 

need to wait for their letters. They can call now or they can email 

now if they had a Sandy claim. We have 600 human service specialists—these are people who answer the phone and do intake— 

fully trained and ready to do this. I have gotten some very positive 

feedback from your colleagues about your constituents’ interactions 

with them. And I have gone back to them and told them I want 

them to keep all that up. 

We have 140 adjusters on staff. And yesterday or today we are 

awarding a contract for neutrals, because one of the things you 

didn’t mention is that if an insured is not satisfied with what their 

adjuster caseworker has developed, they can, in fact, get the services of the complete third party neutral that we will provide at our 

cost to really make a final decision on this one. 

Mr. MEEKS. Good point. I meant to ask that question with regard 

to neutrals. 

Mr. KIESERMAN. Yes, sir. 

Mr. MEEKS. But let me follow up then more about the appeals 

process. Are there mechanisms in place or being developed to identify genuine claims and mitigate prior to legislation? Is that occurring? 

Mr. KIESERMAN. One of our top priorities, and where we are 

working right now, is to overhaul the appeals process. And I would 

36 

say generally, it is the entire NFIP dispute resolution process; it 

is not just appeals. It is how people are treated in the field with 

an adjuster. It is how people are treated when they call their insurance company. It is the entire dispute resolution network that is 

there. We are moving to overhaul all that. 

The FEMA appeals network, though, will be appointing a new 

lead here in the next few weeks, and we will be contracting to 

bring people into help us do business process improvement with 

that now. 

Mr. MEEKS. So those individuals will sit within the FEMA organizational structure? 

Mr. KIESERMAN. They do. 

Mr. MEEKS. Okay. And they are decided—well, let me, in the 

past, when the victims filed appeals in the past, could you tell me, 

do you have any idea what the success rates were? 

Mr. KIESERMAN. 15 percent, Congressman. If you were a survivor, the average rate of appeal is about 3 to 5 percent of all 

claims filed are appealed. And of those, only 15 percent do we generally recommend to the Write Your Owns that they come up with 

a different answer. That does not necessarily indicate to me that 

the process works well. It indicates to me that people may be fatigued by the process and they may be worn down by the process. 

I don’t think we have any internal or intrinsic view to though 

know whether that means we have a well working process or not. 

What I saw in the aftermath of Sandy with whether appeals detected wrongdoing or not concerned me enough that I wanted to 

overhaul the program, and the Administrator has directed me to do 

so. 

Mr. MEEKS. Thank you very much. I am out of time, but I want 

to thank you for your testimony and wish you success. 

Mr. KIESERMAN. Thank you, Congressman. 

Chairman LUETKEMEYER. The gentleman’s time has expired. 

We would like to thank Mr. Kieserman for being here today. 

Thank you for your testimony. You have been very frank, very 

forthcoming, and we certainly appreciate it. 

You mentioned several times, reforms that you would like to see. 

I know I asked the question about it. You have also talked about 

a reform task force that you put together. If we can get you to give 

us some information on the task force, the parties that are involved, what you are trying to do with it, that would be fantastic. 

I understand that either yourself or some of your staff are going 

to sit down with the committee staff shortly, in the next week or 

two here, and discuss some reforms. We certainly want to continue 

to look forward to that opportunity. 

And also, if you have other ideas, to be willing to put them into 

a letter form or to inform your staff when they meet with our committee staff to see what your suggestions would be. Sometimes you 

need to be talking with the people who are in the eye of the storm 

to figure out what is going on and what we need to actually do to 

change things. 

But we certainly appreciate all of that. I wish you well— 

Mr. KIESERMAN. Thank you. 

37 

Chairman LUETKEMEYER. —in your new occupation. I know Mr. 

Wright has an awfully big set of shoes to fill. I wish him well and 

look forward to working with him in the future. 

I know one of the issues that was of concern to me that was 

brought up today was the mapping. I, like Mr. Pearce, have homes 

in my district that are sitting literally hundreds of feet above a 

floodplain and yet they are in a floodplain. So we have some work 

to do there, and we will look forward to working with you on that. 

The Chair notes that some Members may have additional questions for this witness, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to this witness 

and to place his responses in the record. Also, without objection, 

Members will have 5 legislative days to submit extraneous materials to the Chair for inclusion in the record. 

And with that, this hearing is adjourned. 

[Whereupon, at 3:59 p.m., the hearing was adjourned.] 

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A P P E N D I X 

June 2, 2015 

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