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Flood Insurance Alert: Major Changes Began April 1

Posted By Administration, Tuesday, April 5, 2016

Changes in regulations for the National Flood Insurance Program (NFIP) began on April 1st. The regs continue the implementation of the Biggert-Waters Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance Affordability Act of 2014.

 

The point is to make the NFIP more actuarially sound via premiums in line with true risk.

 

So now renewals will require premium increases, other fees and Reserve Fund Assessment changes. There are lots of other changes:

 

  Write-your-own (WYO) policy changes will now be sent out 90 days in advance and not 45.

  Premium rates will jump an average of 4% to 6% and when factoring in fees, surcharges and assessments, the average will be 9%.

  Non-residential business properties could jump as much as 25%.

 

PIA National sent a bulletin out on changed to the National Flood Insurance Program (NFIP). It said the Federal Emergency Management Agency (FEMA) has released the long-delayed NFIP Manual for the April 1, 2016 changes.

 

At the same time, it has issued a separate bulletin with critical information for PIA agencies that write flood. It is Bulletin w-16021 — Clear Communication of Risk: When Congress passed the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA), its Section 28 requires that FEMA advise every policyholder of what their flood risk is. This is referred to as the Clear Communication of Risk mandate.

 

After much discussion, FEMA decided it will outreach to insureds in two phases. This bulletin [w-16021] outlines what business will be placed in which phase, its timing, and includes all instructions and notices to insurers.

 

Here’s what PIA National says it is important for you to know:

 

1. This is a material change from how the NFIP has operated. Until GW14, NFIP has been a "once-&-done program", i.e., write it correctly as it comes new into the NFIP, and then it just renews. 

 

Originally, agents and WYOs were the parties charged with determining the flood zone and rating particulars. However, the law was changed to make the lender the party that determines flood zone (irrespective of what an agent or WYO may believe). The Flood Insurance Producers National Committee (FIPNC), the Insurance Institute for Business & Home Safety (IBHS) and Write-Your-Own carriers (WYOs) have made this and many other factors known to FEMA, as to why a policy may need to be corrected for reasons that are not under the control of agency or the WYO.

 

 

2. Hence, agencies must appreciate that while the name of this outreach is about communications, the underlying purpose is the review, update and if necessary re-underwriting of the NFIP book. Congress and FEMA want to be sure that every piece of business written in NFIP is written correctly.

 

3. Therefore, it is important that agencies review this entire bulletin. Members need to receive guidance from their WYO, as to the timing and for a copy of the final notice sent to policyholders.

 

4. Review your book of NFIP business. Suggested practice guidance advises that agencies may wish to identify what portions of their current NFIP book will be affected by the 1st and then 2nd phases.  This will allow an agency to better prepare for and anticipate who and what nature of calls they may receive; how to handle these per advance consultation with your WYO; and also spot early any particularly complex/special treatment NFIP insureds you may have. For these "special" accounts, the agency may wish to organize the documentation in and for that file, and determine if, and if so when might the agency discuss this with their WYO to assure that everything and everyone are aligned.

 

What It Means to Agencies: As PIA agencies know, having the right carrier-partners is a crucial part of making it work well for agency insurance customers and agency. It is no different when writing NFIP business. Being with a quality, lead WYO-insurer that works everyday with Main Street Independent Agencies is important, and PIA National offers members resources in this area (see below).

 

If you have any questions, please contact Pat Borowski, patbo@pianet.org.   

 

Source link: PropertyCasualty360.com


Tags:  Flood  Flood Insurance  Flood Insurance Alert: Major Changes Began April 1  Insurance Content  Insurance Industry  Insurance News  Weekly Industry News 

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