Changes at the NFIP — Monthly Payments

Since 1968 the National Flood Insurance Program (NFIP) has only received yearly payments for insurance coverage. After 55 years, the NFIP administrator, the Federal Emergency Management Agency (FEMA) says it’s about time the NFIP moved into the modern world.

So on December 31st of this year, the NFIP will start taking monthly payments for flood insurance instead of requiring a once a year hit. The point — FEMA says — is to make it easier for people to afford to purchase flood insurance.

Oh, and a decade ago, Congress amended the NFIP regulations via the Homeowner Flood Insurance Affordability Act to allow for monthly payments. The agency just didn’t do it and now it will.

“Providing an option for monthly installments will expand access to flood insurance to meet the evolving needs of the nation,” FEMA noted in comments on the Federal Register. “The option to pay in installments may also increase policyholders’ budgetary flexibility by alleviating cash flow pressure, as they could use the deferred payment to address other monthly needs.”

In the meantime, Republican Louisiana Senator Bill Cassidy has issued a report called, The Flood Insurance Crisis: A Comprehensive Breakdown of Rising Flood Insurance Premiums.

It is critical of the NFIP’s rate reforming, Risk Rating 2.0 that went into effect a couple of years ago. Cassidy said the idea behind the reforms was to make the NFIP more actuarily sound but that hasn’t been the case. It has been incredibly hard of those required to have flood insurance.

In Louisiana, he noted, the average increase between 2021 when Risk Rating went into effect and now has been about 234%. That has led to 52,000 people in Louisiana to drop their flood insurance policy.

“This report confirms what Louisiana homeowners already know — the National Flood Insurance Program is broken,” Cassidy said. “We must understand the problem to properly diagnose it and address it. This report clearly lays out why flood insurance premiums are out of control, but also why there is reason to hope.”

He wants Congress to pass a reform package on the reforms that will put a ceiling on price hikes, help with mitigation efforts and streamline the claims process.

“It is not just that insurance policies have become more expensive, but they have become more expensive much more quickly,” Cassidy’s report says. “To add insult to injury, these changes were implemented with minimal communication and transparency, which has understandably made the experience all the more frustrating for policyholders.”

Source link: Insurance Journal — https://bit.ly/4ehCyaJ

Source link: Insurance Journal — https://bit.ly/40vFldb