At press time, the U.S. House of Representatives Financial Services Committee is conducting a markup on a package of seven bills to reform and reauthorize the NFIP.
The markup and committee votes on the bills are not expected to conclude today, and additional changes to the bills are anticipated. However, the bills are currently expected to pass the committee.
The legislation would reauthorize the NFIP for five years and addresses a variety of issues, including providing greater private market access, enhancing mitigation efforts, updating the flood mapping process, addressing consumer costs and affordability, and reforming the NFIP claims process. A short summary of provisions in the legislation is available on the Big “I” website.
Most important for independent insurance agents and brokers, one of the bills, H.R. 2874, the “21st Century Flood Reform Act” by Subcommittee Chairman Rep. Sean Duffy (R-Wisconsin), addresses WYO compensation.
As originally introduced, H.R. 2874 would have capped all payments insurance companies receive for participating in the WYO program at 25% of policyholder premiums before various federal fees and surcharges. Currently, WYO companies receive 30.9% to administer the NFIP and can receive additional compensation for claims handling. WYOs pay insurance agents, vendors and state premium taxes, among other costs, from that allowance.
During the markup, Rep. Duffy offered an amendment that minimizes WYO program cuts. The amendment, which is expected to be approved, says that WYO companies cannot receive more than 27.9% to administer the program. However, WYO companies would still receive additional compensation above that cap for claims handling-related costs, or if the NFIP Administrator deemed additional payments necessary. Finally, the 3% reduction would be phased in over three years, and the NFIP would have to reduce administrative costs and burdens on the WYO program by at least 1.5% over the same time period. Should this language become law, the program cuts and the impact on agent compensation are expected to be limited compared to the original proposal.
Due to the WYO cuts, among other issues, the Big “I” has officially adopted a neutral position on the legislative package the committee is considering today. But the three property-casualty carrier trade associations, which together represent the majority of the WYO companies, have endorsed the legislation. Working closely with these trades, the Big “I” was the only agent and broker group involved in the congressional discussions, which led to the new amendment minimizing the WYO program cuts.
Ahead of the markup, the Big “I” used a multipronged approach, launching a targeted grassroots campaign and scheduling numerous meetings with members of Congress and staff to address the issue of WYO compensation. As H.R. 2874 moves through the legislative process in the House, the Big “I” will continue defending WYO and agent compensation and advocating on other issues important to independent agents who sell and service flood insurance. House floor action on NFIP reauthorization and reform could occur as soon as late June.
Meanwhile, in the U.S. Senate, another bill to reauthorize and reform the NFIP was introduced earlier this week by Sens. Bob Menendez (D-New Jersey), John Kennedy (R-Louisiana), Chris Van Hollen (D-Maryland), Marco Rubio (R-Florida), Elizabeth Warren (D-Massachusetts) and Thad Cochran (R-Mississippi), Cory Booker (D-New Jersey) and Bill Nelson (R-Florida). The legislation would reauthorize the NFIP and make a number of reforms to the program, including capping WYO compensation at 22.46%, increasing agent training requirements and creating an agent advisory council to the NFIP. Senate Banking Committee leadership is expected to introduce additional legislation before the Senate takes up NFIP reform.
Jen McPhillips is Big “I” vice president of federal government affairs. Jennifer Webb is Big “I” federal government affairs counsel.