Congress approved a five-year extension to the National Flood Insurance Program, ending four years of short-term extensions that fueled uncertainty and several lapses in coverage.
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Courtesy: George Armstrong/FEMA
The bill includes a number of reforms designed to help lessen the $18 billion in debt for the program, which provides more than 5.6 million property owners with land in flood-prone areas with coverage against flooding. The extension was included in a transportation bill.
“This is a watershed moment for flood insurance,” said Andrew C. Harris, president-elect of Professional Insurance Agents of America.
The House passed the bill, 373-52, while the Senate passed the bill, 74-19. President Barack Obama signed the measure, contained a transportation bill, June 30. Had Congress not acted before its July 4 recess, the program could have expired again, this time July 31.
To put the program on better financial footing, a number of reforms were approved. They include:
- Eliminating over time subsidies for some properties
- Allowing the maximum annual premium increase to go from 10% to 20%
- Enabling properties used by multi-families to buy NFIP coverage
- Necessitating minimum deductibles for claims
Other tweaks look to improving the program’s functionality in the future. They include having an advisory council address how best to modernize its maps to reflect changes in flooding patterns in recent years and forcing the NFIP to determine how it can pay back its debt, mostly from claims related to Hurricane Katrina.
Congress also ordered the Government Accountability Office (GAO) to study whether adding business interruption and other living expense coverages would help the program and the new Federal Insurance Office to report on what legislation might fix insurance issues related to natural disasters.
Logjam broken
Harris congratulated Congress for “finally breaking the legislative logjam,” which came after the House passed a bill extending the program for five years in July 2011. The House bill became mired in the Senate, as Majority Leader Harry Reid (D-Nev) wouldn’t let the bill reach the full Senate, even though the Senate Banking Committee endorsed it.
When Sen. David Vitter (R-La.) tried to attach the bill to a Food and Drug Administration measure in May, Reid agreed to let the bill reach the floor during the summer and Vitter withdrew his fight.
“I’m pleased the Senate was able to move past the obstacles and pass this important legislation to improve the National Flood Insurance Program,” Sen. Jerry Moran (R-Kan.) said in a statement.
Awkward position for agents
Since 2008, insurance agents have been caught in an awkward position, unable to promote the program because it’s long-term viability had been in question. The program lapsed three times in 2010.
Prior to 2008, Congress approved five-year extensions to the program’s funding without much debate.
“Professional insurance agents play a vital role in delivering the federal flood program to consumers, making the program more efficient and stable and helping consumers understand a very necessary but often misunderstood coverage,” Harris said.
Risk-based pricing coming
Tom Santos, vice president for federal affairs at the American Insurance Association (AIA), which represents more than 300 property-casualty insurance companies, said the extension includes “meaningful reforms.”
“The bill includes critical reforms that will put the program on more solid financial footing and protect its 5.6 million policyholders for years to come,” Santos said in a statement. “Congress recognized that reforms including movement toward fiscal soundness by eliminating premium subsidies, and moving toward risk-based pricing are necessary for the long-term stability of the program. These reforms make significant progress towards protecting consumers and taxpayers, and improving the NFIP.”
The AIA and insurance groups have pushed for the long-term extension, saying it provides greater stability for those involved in real estate transactions in flood-prone areas and for policyholders.
More consumer confidence
“The five-year extension will provide certainty in the flood-insurance program thereby increasing consumer and business confidence in the NFIP,” Santos added.
The extension could also help the flagging economy. “Bringing stability and certainty to the flood insurance program is critical for helping lead a long-term economic recovery and directly impacts the housing market,” said Ben McKay of the Property Casualty Insurers Association of America, representing more than 1,000 member companies.
SmarterSafer.org, a Washington, D.C.-based coalition of organizations who support environmentally responsible, fiscally sound approaches to public safety, said the extension is “ a momentous step towards better protecting our communities, environment and taxpayers.
“Reforms in the bill will guard lives and property, help ensure flood maps are accurate, phase out expensive subsidies, and allow the program to access private sources of financing – putting the NFIP on sounder financial footing while moving people out of harm’s way and environmentally sensitive areas,” the group said in a statement.
National Flood Insurance Program extension to 2017 ‘watershed moment’ via IFAwebnews .