Lawmakers criticize federal insurance program for wartime contractors

"What we're looking at is a horrendous situation," Sanders said. "There has been huge wartime profiteering."

Insurance executives said they had done their best to dispense benefits fairly under challenging conditions.

Charles Schader, AIG's president of worldwide claims operations, said his firm had increased its claims-handling staff from five to 70 people over the last seven years. AIG holds a near-monopoly on the war-zone insurance, handling about 85% of all claims.

"We do agree that there are many changes in this system that would help in administration and provide a better product," Schader said. "I want to make it very clear . . . that we really do owe [civilian workers] a debt. This is not anything vindictive or a corporate policy of denial."

George R. Fay, executive vice president of CNA Financial Corp., said his firm had worked hard to make sure that injured civilians received medical care and benefits.

But Fay, a retired Army Reserve general who served in Iraq, said the law required payment for injuries within 14 days, forcing carriers to issue denials to protect their legal rights.

"A regulatory scheme that creates such incentives can only produce unintended and sometimes tragic results," Fay said.

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t.christian.miller@ propublica.org

This report is published in cooperation with ProPublica, an independent investigative newsroom.