The package of bills to renew the federal government’s flood insurance program numbers seven. Reformation and extension of the National Flood Insurance Program (NFIP) — which is heavily in debt — is part of the goal of the bills which will extend the program for five years.
The Write Your Own (WYO) program is in the five bills passed two weeks ago and that will now be combined into one and then be considered by the full House. While approving of much of the target reforms of these bills, PIA National opposes that portion of the bill because it changes the commission structure for companies — and eventually agencies — participating in the WYO program.
The WYO reimbursement rate is used by carriers to pay agent commissions, and most WYOs have acknowledged — for them to remain in the program — they intend to pass any cut to the WYO rate on to agents in the form of commission cuts, similar to what was done in healthcare. The rate of commission is now 30.9% and the proposal is to drop it three-points to 27.9% over three years.
PIA National Executive Vice President Mike Becker said PIA will not accept or support that position. “Our position is straightforward: As an agents' association, PIA will not endorse a provision which will likely result in a cut to agent compensation. Accordingly, PIA will continue to oppose this legislation.”
The bills have multiple and important provisions — a multi-year reauthorization, improving the claims process, and taking steps to encourage the private market to sell policies — that PIA National supports. It is with much reluctance that the association opposes the bills.
House Financial Services Committee Chairman and Republican Rep. Jeb Hensarling of Texas said, “While we have a responsibility to provide certainty to the homeowners and small business owners who rely on the NFIP for protection, we must also ensure that the program protects the interests of hardworking taxpayers. These reform bills will benefit all Americans because they will invite private sector competition and lead to a sustainable flood insurance program — sustainable for homeowners, small business owners, residential and commercial real estate markets, and sustainable for hardworking taxpayers.”
PIA agrees. What the association will not agree to is the cuts in WYO commissions. By the way, the PIA is the only agent group to oppose the legislation over this issue. When it comes to defending PIA members' commissions, PIA refuses to be neutral.
Many groups representing insurers are open to the changes. Nat Wienecke of the Property Casualty Insurers Association of America (PCI) said PCI supports the reforms. He used words like “strongly” and “applauds” and “appreciates” in his statement.
National Association of Mutual Insurers (NAMIC) spokesman Jimi Grande said, “The legislation allows property owners and communities to continue to mitigate their risk of flooding, while at the same time maintaining the availability of affordable flood insurance coverage for those who need it.” he said.
Grande said this is the first step toward making the NFIP solvent.
Source links: PIA National, Insurance Journal, The Hill