National May 5, 2017

PIA members weigh in on the NFIP

The National Flood Insurance Program is set to expire Sept. 30, 2017. With that in mind PIA polled its members to get their thoughts on some of the major questions revolving around reauthorization talks now taking place in Washington, D.C.

Several hearings were held in the House and Senate in March on the issue of reducing the cost of running the NFIP. During the hearings, an idea was raised to cut the commissions paid to producers who sell the NFIP product. Since those hearings, PIA has strongly advocated against this course of action, advising elected officials that if commissions are cut, producers will simply stop selling flood policies.

Respondents to the NFIP survey back up that claim as 60 percent of respondents indicated that if the NFIP was to cut agent compensation they will stop selling NFIP policies. If Congress is interested in reducing the NFIP’s nearly $26 billion debt cutting producer compensation will only exacerbate the problem as fewer NFIP policies will be sold, resulting in fewer premium dollars for the program.

PIA has pushed Congress to consider a long-term reauthorization of the NFIP to allow time for the Federal Emergency Management Agency to make necessary changes to the program. Respondents overwhelmingly agree that a long-term reauthorization is needed, as 75 percent indicated they prefer a reauthorization of more than five years.

When Congress passed the Homeowner Flood Insurance Affordability Act of 2014 many of the rate increases on primary residences first put in place by the Biggert-Waters Flood Insurance Reform Act of 2012 were rolled back. However, the legislation left increases in place for secondary homes. The majority of survey respondents disagree with this approach. Sixty-five percent of respondents believe that secondary homes should receive the same grandfathered rates as primary residences in any reauthorization bill.

While political division is ever-present in Washington, D.C. there seems to be an agreement among members of both parties that the private-market appetite for flood insurance increases that any reauthorization bill should include measures designed to make it easier to sell private-market flood insurance. Respondents agree, with 65 percent stating they have placed a client with a private flood carrier in the past year.

Finally, several reauthorization bills have been released that have included provisions to provide incentives to homeowners for flood mitigation. Respondents think this is crucial to the sustainability of the NFIP as 90 percent of respondents think that any NFIP reauthorization bill should include incentives for mitigation.