The federal flood insurance program is "stacked against" policy holders, U.S. Sen. Robert Menendez said during a Wednesday hearing with the head of FEMA.

U.S. Sen. Robert Menedez (D-NJ) visits the home of Doug Quinn, a Silverton resident whose home was damaged in Sandy (Ilya Hemlin, Townsquare Media NJ)

Menendez (D-NJ), who was at the home of a Toms River resident still unable to rebuild his home after Sandy, said there have been too many cases of policy holders fighting with insurance companies only to get lowball offers.

Flood insurance is offered primarily by the government, however FEMA relies on private insurers to sell policies and adjust claims. Menendez said the fundamental problem is companies that overpay must repay the federal government, yet underpaying yields substantially less risk.

"There's a reason that the statute treats underpayment equally," Menendez said. "It doesn't say it's less important than overpayment and that is not what is happening."

The senator said it was "simply wrong" that not one insurer who has consistently underpaid has been kicked out of the program.

FEMA Director Craig Fugate agreed the program needed improvement and said many of the independent claims brought forth by Menendez would be investigated.

However, Fugate told Menendez that FEMA does not track how often appeals of claims are granted, so there is no oversight to determine if companies are consistently underpaying.

"If you don't track this information, I don't know how exactly you know it's a problem until it gets so big," Menendez said.

A statement from FEMA indicated that of the 236,000 flood insurance policies in effect in New Jersey when Sandy hit, 74,000 claims were filed with payments averaging $61,000. It also stated 1,300 appeals were filed and FEMA has seen or expects 453 lawsuits.

Menendez was also critical of FEMA for failing to meet congressional deadlines for appeals, yet the agency itself rejected policy holders if they filed late.

"If FEMA can't live under those deadlines, then the policyholder should have the same opportunity to the same period of time that (FEMA) can't live by, so they don't have their rights foreclosed," Menendez said.