Here’s how things work. Under the National Flood Insurance Program’s (NFIP) agreement insurers can sell flood policies under the Write-Your-Own program. What they can’t do — under a contractural clause — is cancel those policies and sell their own, less-expensive plans.
Currently 86% of the NFIP policies sold are from the WYO program.
Now FEMA (Federal Emergency Management Agency) is changing things and removing those restrictions. And it is doing this without action by Congress. Or at least ahead of what Congress might have planned or not planned at all.
A private insurer can now offer private flood insurance to an insured as long as it meets certain criteria. The new FEMA/NFIP policy is called code 26 and it allows the cancelation of a policy as long as a policyholder has purchased a similar policy from somewhere else. It also has to be on the same property that was insured by the NFIP.
If it is in mid-term, a refund can be given. In the past changes like this could only take place at renewal.
Other than looking at getting more private insurers involved in selling flood insurance, other changes are coming. On January 1 next year rate increases are coming to make properties more actuarially sound. Some subsidies are being phased out.
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