The Senate and the House are both looking at bills to renew the National Flood Insurance Program (NFIP). PIA National likes the Senate bill but refuses to support what may come out of the House.
In a statement on NFIP reform, PIA National said, “The National Association of Professional Insurance Agents appreciates the work done by Senate Banking, Housing and Urban Affairs Committee Chairman Michael Crapo (R-Idaho) and Ranking Member Sherrod Brown (D-Ohio) on their bill, the National Flood Insurance Program Reauthorization Act of 2017 (S. 1571), which is currently before the committee. This initial legislation is an auspicious start in light of the fact that it provides a long-term reauthorization of the National Flood Insurance Program and has left untouched the Write Your Own (WYO) reimbursement rate for insurers, maintaining agent commissions.”
As for the House bill? PIA National is in strong opposition to the bill “passed out of the Financial Services Committee because it arbitrarily cuts the WYO rate, which is used by carriers to pay administrative expenses as well as agent commissions, among other things. Most WYOs have acknowledged that, for them to remain in the program, they will be forced to pass any cut to the WYO rate on to agents in the form of cuts to agent commissions.”
PIA National Vice President of Government Relations Jon Gentile said PIA will remain opposed to any legislation that cuts the WYO rate without robust protections for agents.
“We applaud this first step by Chairman Crapo and Ranking Member Brown to reauthorize this critical program used to protect against floods. PIA will now continue to work with members of the committee to supplement the bill by supporting efforts to expand the private flood insurance market, enhance mitigation programs and improve the claims process for policyholders, and include provisions meant to recognize the essential role independent insurance agents play in delivering this critical and often misunderstood program to consumers,” Gentile said.
One thing that is certain, the NFIP reauthorization needs to happen before September 30th of this year. The looming deadline has the National Association of Insurance Commissioners (NAIC), the PIA and other insurance, realtor and economic groups concerned.
The NAIC does — however — like the House Flood Insurance Market Parity and Modernization Act because it gives those buying private flood insurance the same treatment by federally-backed mortgage lenders as those purchasing insurance from the NFIP.
NAIC President and Wisconsin Insurance Commissioner Ted Nickel said, “It is important to maintain a stable program to provide certainty for policyholders while also encouraging greater growth in the private flood insurance market as a complement to the NFIP. State insurance regulators support this legislation because it provides consumers with more options for coverage which could lead to more affordable prices.”
Other groups want reforms, too. For one, the number of properties in flood dangerous areas has jumped by 67% in the last 20-years. Or so says Evan Hecht who is the president of The Flood Insurance Agency — and agency that specifically sells flood insurance. Worse, Hecht said, “The number of properties that have had a third loss has increased 56%.”
He made that statement at a recent CAT Risk 2017 Masterclass held by Insurance Business America.
The Federal Emergency Management Agency (FEMA) administers the NFIP and it defines repetitive losses as:
• A property that has two or more claims of $1,000 or more over 10 years is repetitive
• A property with four claims of more than $5,000 each is called severe repetitive
• Two claims equaling the total of a building’s current value is also severe repetitive
Emergency Management Magazine says currently we have 11,000 severe repetitive-loss properties in the U.S. That number is growing. The NFIP says they account for 30% of the claims of its five million active policies.
FEMA task force member Joe Rossi — who chairs the Marshfield and Massachusetts Coastal Coalition — said, “These properties give the program a bad name, when the program was designed so no-one could be labeled non-renewable. The rates for these structures are significantly higher; they don’t get off scot-free. There are penalties.”
Another group wanting a say in how renewals are handled is the Natural Resources Defense Council (NRDC). It wants residents and homeowners to move to safer areas or not build in those areas at all.
NRDC head Rob Moore said for every $100 the NFIP and FEMA spend to repair and rebuild flood damaged homes, they spend $1.75 to move people to less flood prone areas. “Many of those homeowners would probably prefer to relocate somewhere where flooding is no longer a part of their life, and that would also save… the expense of having to rebuild these properties,” Moore said.
He’s suggesting a buyout be part of a flood policy if the owners don’t want to rebuild and Moore contends that will save the NFIP money in the long run.
Source links: PIA National, Business Insurance, Insurance Business America — link 1, link 2