A new bill doing a five-year reauthorization of the National Flood Insurance Program (NFIP) has been introduced in the House Financial Services Committee. Rep. Jeb Hensarling of Texas chairs the committee and said he wants a law that “begins the transition to a competitive, innovative and sustainable flood insurance market where consumers have real choices.”
Translation: maybe more private carriers doing flood insurance.
The NFIP is $25 billion in debt to the U.S. Treasury and one of the goals of the new renewal bill is to reduce that amount significantly. To do it the bill proposes surcharges and assessment rates and to boost the NFIP’s reserve fund by 1% a year.
Added to the plan is instructions to the Federal Emergency Management Agency (FEMA) — that administers the NFIP — to find ways to minimize — as Hensarling put it — “the chances of future borrowing from taxpayers by giving the NFIP the tools it needs to return to a strong financial footing while protecting homeowners.”
The new plan — if enacted — cuts the cap on premium rate hikes from today’s 18% to 15%. And in an effort to get more private insurers involved, the NFIP will be barred from selling policies for new structures in high-risk areas if private insurance is available to take on the risk.
Meanwhile, during the five-year period the NFIP will begin adjusting rates based on the actual risk to properties insured. It will also do away with policies for homes whose replacement value goes above $1 million.
Republican Sen. Bill Cassidy of Louisiana and New York Democratic Sen. Kirsten Gillibrand have proposed provisions that aren’t in the bill that is now before the House committee. Their ideas including making premiums affordable to a broader base of consumers via vouchers to help low income households.
PIA National Vice President Government Relations Jon Gentile worries the new renewal push might end up cutting the reimbursement rate for Write-Your-Own (WYO) carriers. He says that would be counter-productive and lead to fewer policies being sold.
“A cut to the reimbursement rate for Write Your Own insurance companies would likely trickle down to independent agents who sell this very complicated and vital line of insurance. That cut would lead to an exodus of qualified agents selling it. Any proposal to reauthorize the NFIP that would impede agents' active engagement in selling flood insurance should be rejected," Gentile told Best's News Service.
PIA — however — does understand the need to address the NFIP’s debt. “
We are aware the program is heavily in debt due to hurricane Katrina and Superstorm Sandy. However, fewer qualified agents selling the products will hurt consumer access and slow the NFIP's take-up rate when the very opposite is needed to ensure the continued viability of the program,” Gentle said.
Source links: Insurance Business America — link 1, link 2