National May 15, 2017

House GOP to unveil five-year flood insurance bill

Republicans in the House of Representatives are preparing to unveil a National Flood Insurance Program Reauthorization bill, which would reauthorize the program for a five-year period and, in part, reduce the level of compensation that Write-Your-Own Companies receive for administering the program.

Under the current system, WYOs receive just under 32 percent of NFIP premiums in order to administer the program. Under the bill (the 21st Century Flood Reform Act), the percentage would be lowered to 25 percent. PIA is concerned that any cut to WYOs compensation will result in a cut to producer compensation as WYOs look for ways to reduce their expenses. PIA has been fighting to protect producer compensation in the NFIP since this issue was raised during congressional hearings on the NFIP that took place in March, and the association has advised elected officials that if producer commissions are cut, producers will simply stop selling flood policies and the NFIP will be hurt.

In addition to reducing the WYO compensation, the proposed bill aims to address consumer cost and affordability by lowering the cap on any individual policyholder’s annual rate increases from 18 to 15 percent and limiting the chargeable risk premium of any residential property to no more than $10,000 in any given year. The bill also would cut the annual surcharges created by the Homeowner Flood Insurance Affordability Act of 2014.

The bill also would introduce measures to encourage private market participation in flood insurance marketplace. The bill would ensure that private flood insurance can be used to satisfy the NFIP’s continuous coverage requirement, an essential aspect of ensuring policyholders are not penalized for moving from one policy to another. The noncomplete clause the WYO currently have to agree to also would be eliminated, allowing WYOs to sell their own private flood insurance policies outside of the NFIP.

The bill also would require the Federal Emergency Management Agency to align with private sector practices and allow policyholders who cancel their NFIP policies during the middle of the policy term to receive refunds on a pro-rata basis if the policyholders elect to replace their NFIP polices with private flood insurance.

A draft of a bipartisan reauthorization bill was released in the Senate at the end of April. That bill does not contain a provision cutting WYO compensation.