by Timothy Montales
Yesterday, a six-senator bipartisan group led by Bob Menendez (New Jersey) and John Kennedy (Louisiana) and composed of Chris Van Hollen (Maryland), Elizabeth Warren (Massachusetts), Thad Cochran (Mississippi), and Marco Rubio (Florida), proposed the overhaul of the National Flood Insurance Program (NFIP) to cap premium increases, use advanced radar to provide more accurate flood maps, and provide vouchers to some homeowners who would pay for coverage. They highlighted that hitting homeowners with higher premiums should not be considered a solution.
The bill is among the many pending proposals for a program that guarantees five million homes and businesses, but that has been unable to repay the near $25 billion borrowed from the US Treasury to respond to catastrophic storms, including 2005’s Hurricane Katrina and 2012’s Superstorm Sandy.
Celebrate excellence in insurance. Nominate a worthy colleague for the Insurance Business Awards.
Home sales in flood plains will be disrupted should Congress decide not to renew the NFIP before its September 30 expiration, USA Today reported.
“We cannot build a sustainable system by simply imposing higher premiums on homeowners,” the bipartisan group wrote in an opinion published by The Wall Street Journal yesterday.
Their bill would cap annual premium increases at 10%, compared with 2014’s allowed maximum of 25%, while families with insurance costs that exceed a percentage of their income set in the bill will qualify for vouchers. The bill will also offer low- or no-interest loans for home elevation work that will lessen flood impacts.
“This legislation puts the lessons we learned after Superstorm Sandy into action, levels the playing field for policyholders, and attacks the NFIP’s rampant waste and abuse to create real savings and greater investment in mitigation and resiliency efforts,” Menendez guaranteed.
The bill would cap the commissions paid to insurance companies at 22%, and suspend NFIP’s practice of paying $400 million annually to the federal treasury. However, it will not take steps to encourage private insurers to get involved in the flood insurance market, which is the goal of several other plans being considered in the House Financial Services Committee and a feature of a bill previously proposed by Senators Bill Cassidy and Kirsten Gillibrand.
The Cassidy-Gillibrand bill presents a plan to transition a Federal Emergency Management Agency (FEMA) operated program to more private-sector competition and renew the food program for a decade.
Both the Menendez-Kennedy and Cassidy-Gillibrand proposals claim that they are drawing on the experiences of Superstorm Sandy’s victims as they tighten controls over FEMA-issued contractors to process claims, while the agency was forced to reopen appeals by thousands of Sandy-ravaged homeowners.
Under the previous law, insurers that served FEMA policies faced a financial penalty for overpaid claims, but not if they underpaid them.
Related stories:
Senators introduce NFIP reauthorization bill
FEMA owes the government $25 billion
.jpg)
