The legislation would reauthorize the National Flood Insurance Program (NFIP) for five years and clarify that private flood insurance can satisfy the NFIP’s continuous coverage requirements, a top priority for the Big “I.”
This week, the U.S. House Committee on Financial Services held a hearing entitled, “Build Back Better: Investing in Equitable and Affordable Housing Infrastructure." While the hearing largely focused on affordable housing, it also included a discussion of two National Flood Insurance Program (NFIP) bills important to independent agents and their clients.
It is expected that Democratic members of the Financial Services Committee will push to have much of the legislation discussed during the hearing included in President Biden's infrastructure package, including the NFIP bills.
The hearing included testimony from Ms. Diane Yentel, president and CEO, National Low Income Housing Coalition; Dr. Michael McAfee, president and CEO, PolicyLink; Ms. Jacqueline Waggoner, president, solutions division, Enterprise Community Partners; Dr. Saule Omarova, Beth and Marc Goldberg Professor of Law, Cornell University; and Mr. Brian Riedl, senior fellow, Manhattan Institute.
The first piece of NFIP-related legislation discussed during the hearing was the National Flood Program Reauthorization Act of 2021, which is similar to Big “I" supported legislation that passed out of the committee in 2019 on a bipartisan basis.
The legislation would reauthorize the NFIP for five years. Importantly to the Big “I" and its members, the legislation also includes language clarifying that private flood insurance can satisfy the NFIP's continuous coverage requirements. This ensures that if consumers leave the NFIP for the private market and choose to return to the NFIP, they can do so without penalty. Fixing the NFIP's continuous coverage requirements has been a top priority for the Big “I" and the association will continue to advocate for it to be included in any long-term reauthorization of the NFIP.
Another Big “I" priority included in the legislation is language providing refunds of unearned premiums for mid-term cancellations of NFIP policies if an insured moves to a private policy.
Also noteworthy is what is not in the legislation. The bill approved by the committee does not include a reduction to the Write Your Own (WYO) reimbursement rate, which is used by WYO insurers to pay NFIP agent commissions amongst other expenses. The Big “I" has continually defended agent commissions as part of the NFIP deliberations.
While largely similar to the 2019 bill, the new legislation does include two significant differences. First, this legislation includes a new provision that would lower the annual cap on flood insurance rate increases to 9% from 18%. This revision is largely in response to some Congressional concerns expressed due to the expected implementation of Risk Rating 2.0 and its possible impact on some policyholders' rates. Additionally, the legislation would also forgive the NFIP's significant debt.
The second piece of NFIP legislation included in the hearing was the “National Flood Insurance Program Administrative Reform Act of 2021." The legislation, which is sponsored by Rep. Nydia Velazquez (D-New York), is also similar to legislation considered by the committee in 2019. It would reform the claims process by seeking to provide clarity to NFIP policy terms in addition to reforming the appeals and litigation process.
Of note to Big “I" members, the Velazquez legislation would create a federal flood insurance advisory committee, which would include two insurance agents. The committee would be tasked with making recommendations on matters related to the insurance aspects of the NFIP, including rate making, technology to administer insurance, risk assessment, actuarial practices, claims practices, sales and insurance delivery, compensation and allowances, the public-private partnership under the Write Your Own arrangement, general best insurance practices, and any significant changes proposed to be made regarding the operation of the NFIP.
As Congress considers legislation to reauthorize the NFIP, the Big “I" will continue to strongly advocate on behalf of independent agents and will provide updates in the weekly News and Views e-newsletter.
Wyatt Stewart is Big “I" assistant vice president of federal government affairs.