A bill aimed at promoting private market competition with the National Flood Insurance Program (NFIP) has been met with reservations from a prominent group of independent agents and brokers.
H.R. 4558, titled “Opportunities for a Private and Competitive Sustainable Flood Insurance Market,” hopes to encourage major commercial insurance carriers by allowing the requirement for purchasing flood insurance under federally-backed mortgages to be satisfied by private coverage.
Under current law, federally regulated home mortgage lenders must require home buyers to purchase insurance on properties in high risk flood areas. Currently, the majority of flood insurance policies are provided by NFIP.
Co-sponsor Dennis Ross believes clarifying that private flood insurance satisfies this requirement would induce more carriers to enter the market, providing greater choice to the end consumer.
“Americans across the country would greatly benefit from more choices when it comes to flood insurance policies,” Ross said. “More choices can mean better coverage and cheaper policies for homeowners.”
The bill was introduced in a House subcommittee last month, but industry concerns from insurance agents have arisen in the interim.
According to House testimony submitted by the Independent Insurance Agents and Brokers of America, or the Big “I,” there is a degree of confusion on what may actually satisfy the federal requirement on home loans.
Currently, the Big “I” says mortgage lenders are hesitant to accept private market alternatives and have required these policies to look nearly identical to an NFIP policy. They hope the new legislation will clarify these points, and also allow consumers who use the private market to keep their NFIP subsidized premium if they later return to an NFIP policy.
“Agents are concerned about E&O exposure for selling policies that might not meet the federal mortgage requirement and the potential exposure if the agent sells a policy that negatively impacts the insured’s ability to get subsidized NFIP coverage in the future,” testified Florida agent Don Brown.
Currently, a handful of private insurers--largely backed by Lloyd's of London--offer alternative policies that mirror those offered by NFIP.
