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As Deadline for Renewal Approaches, Washington Debates Further Reforms to Flood Insurance

by Precise Leads

March 21, 2018

Lawmakers have until March 23 to decide whether to completely overhaul the NFIP or approve another short-term renewal.

Just months after the U. S. was battered by a series of devastating hurricanes, lawmakers remain divided on proposed reforms of the National Flood Insurance Program (NFIP).

In the stopgap funding bill it passed in February, Congress authorized a brief extension of the program until March 23. As the latest deadline for renewal approaches, legislators still haven’t reached a consensus on permanent structural changes to the NFIP, a move that the insurance industry supports.

“Congress must use the time between now and then to move away from short-term measures and provide a long-term reauthorization of this program,” said Jon Gentile, National Vice President of Government Relations for the National Association of Professional Insurance Agents. “The NFIP is a program that requires certainty. It is also in great need of reforms.”

Another Short-Term Extension on Tap

The budget deal currently under consideration in Congress includes another short-term extension of the program from March 23 to September 30. While lawmakers appear far from establishing a permanent solution that’s acceptable to both sides, they have a slew of proposals to consider.

In November, the House approved a bill that would have capped premium increases, helped low-income homeowners afford insurance, updated flood maps, and encouraged the participation of private insurers. The bill would also have reduced the number of NFIP-insured properties in flood-prone areas, a less restrictive guideline than President Trump’s suggested outright ban on new construction in high-risk areas.

In the Senate, Sens. Mike Crapo (R-ID) and Sherrod Brown (D-OH) have floated a bipartisan bill that would reauthorize the NFIP until 2024 and tackle the problem of repeatedly flooded properties. A spokesperson for Sen. Robert Menendez (D-NJ), who represents a state with many areas at high risk for flooding, termed that proposal a “nonstarter,” arguing that the bill would fail to make the program affordable and doesn’t encourage communities to undertake flood-mitigation efforts.

Menendez’s criticism of the plan illustrates the role of geography in the debate over NFIP reform. Residents in states with an elevated risk for flooding such as New Jersey may be harder hit by rate increases or potential denials of insurance due to repeated claims.

Long-Term Solution Possible?

With other financial issues such as banking reform still unresolved, observers say that a long-term NFIP solution is unlikely to be enacted in the Senate this year. As the debate continues to rage, insurance agents worry that flood insurance may soon become unaffordable for homeowners who need it.

A report in StarNews Online, a local news website in Wilmington, North Carolina, noted that the Trump administration’s proposed budget includes a provision that would fund assistance to low-income homeowners by increasing premiums on properties built before 1975 or before the first flood insurance maps were made.

If Congress adopts that proposal, local agent Taylor Oldroyd, CEO of Cape Fear Realtors, estimated that older homes could see annual rate hikes of 15% to 25%. “This is not something we would support,” Oldroyd said. “While we recognize the need for improving the NFIP, any rate changes need to be phased in so that homeowners can adjust accordingly.”

Other observers have urged Congress to open the flood insurance market to private insurers, a move supported by most Republicans. In an article on PropertyCasualty360.com, Matt Nielsen and Pete Dailey of the catastrophe modeling company RMS supported legislation that would permit private insurers to review the Federal Emergency Management Agency’s claim database. “This will give the underwriters the confidence in pricing risk that is lacking today,” they wrote.

Conversely, Democrats have expressed concerns that private insurers would insure only properties at lowest risk of flooding, thereby leaving costly high-risk homes to the NFIP. Environment groups, like the Natural Resources Defense Council (NRDC), advocate federal buyouts of homes with multiple claims while decreasing federal premium subsidies.

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