With the recent hurricanes in Texas, Florida, Louisiana, and Puerto Rico, among other places, I thought it was an appropriate time to reflect on what is all taking place with the National Flood Insurance Program and the importance of talking to our clients about flood insurance. PIA of Wisconsin continues to keep all of those impacted by the hurricanes and flooding in our thoughts and prayers.
The National Flood Insurance Program (NFIP) is a program created by congress in 1968. The program enables property owners in participating communities to purchase insurance protection, administered by the government, against losses from flooding, and requires flood insurance for all loans or lines of credit that are secured by existing buildings, manufactured homes, or buildings under construction, that are in a community that participates in the NFIP. The insurance program as of 2017 operates at a loss and has been forced to borrow to fund the program. It’s current debt is around $25 Billion, the majority of that from Hurricanes Katrina and Sandy.
The U.S. House of Representatives has passed a $36.5 Billion-dollar disaster relief package to help hurricane and wildlife recovery efforts. “PIA is pleased by the inclusion of the $16 billion in debt relief for the NFIP,” said PIA in a statement. “This will allow the NFIP to continue to pay claims arising out of hurricanes Harvey, Irma, and Maria, as it had already reached its borrowing limit last month.
While the House made progress on reauthorizing the law by passing several separate bills, the senate has yet to see any legislative action aside from several proposals being introduced. PIA has expressed its opposition to the entire House legislative package because of a provision that is likely to lead to a cut in agent compensations by cutting the Write Your Own (WYO) reimbursement rate. Most insurance carriers that sell NFIP policies have acknowledged that, for them to remain in the program, they will be forced to pass any cut to the reimbursement rate to independent agents through their commissions. PIA is the only agent association standing firm against the House legislation because of the WYO cut, and we will oppose any short-term extension or reauthorization measure that cuts the WYO reimbursement rate unless it includes a robust and specific protection for agent commissions.
Take Action- Email, call or mail a letter to your senators and representatives encouraging them to NOT support any reauthorization of the NFIP that will lead to a cut in commissions for insurance agents. Agents are not going to have nearly the incentive to write flood policies that take time and effort with a reduction in commission. Independent Agents are the face of the NFIP for the clear majority of consumers. We are on the front lines when disasters hit, filing claims and walking our clients through the messy process of the aftermath of a flooding event.
Lastly, make sure that you are talking to your consumers about flood insurance and the potential impact it could have on their home and business. Even though they are likely NOT in a mandatory flood zone, defined by NFIP, that does not mean that they do not have an exposure to flood. Consider this, only about 15% of homes in Texas that have flood damage actually have a flood insurance policy. Since 2004, PIA and The Hartford have joined together to provide PIA member agents the opportunity to offer your customers flood insurance through the Hartford, a WYO company. If you need a flood carrier, PIA suggests The Hartford. s weather patterns continue to change, we need to make sure that our clients are aware of the risk. Give them the option and explain to them the coverage and pricing. If they are not interested, have them sign off on flood insurance rejecting the coverage so that at claim time you will be protected.