Write-Your-Own carriers participating in the National Flood Insurance Program (NFIP) shall not authorize the rebating of commissions on new or renewed NFIP policies, beginning Oct. 1, the Federal Insurance and Mitigation Administration (FIMA) said in a bulletin
released last week.
Rebating on flood insurance has been a source of many complaints and inquiries from agents and companies alike for FIMA over the past several years, according to the bulletin.
For many, it’s considered unethical to induce purchases by returning a portion of a premium or commission for an agent or broker to the insured. The rebating issue on all lines of coverage has been debated for many years and most states have expressly forbidden or regulated the practice for insurance agents and brokers.
Yet the practice has continued in California and Florida, particularly for flood insurance. To learn more about the issue in Florida, read the Florida Association of Insurance Agents’ white paper
With ongoing pressure from interested parties like the Big “I” and others, FIMA has released this new bulletin, which says it has “concluded that the goals of the NFIP are better served by a system of uniform national pricing that will ensure that policyholders pay the same price for the same risk.”
FEMA does not directly regulate insurance agents who sell flood insurance, but it does administer the NFIP and set standards governing the activities of participating WYO companies related to the sale and marketing of flood insurance, the bulletin notes.
Typically, rebating has not been done on Dwelling flood insurance, but could be as much as 10% of an agent’s or broker’s commission on a Residential Condominium Association flood policy or a General Property flood policy.
This is an issue that Big “I” government affairs has been actively lobbying on and it believes FIMA’s decision represents a major win for the Big “I”. Unfortunately, it is also likely one that will be challenged by its opponents. The Big “I” continues to be vigilant in its efforts to represent members on issues of flood market access, education and advocacy.