Friday was an active day for flood insurance reform discussion. Three insurers, including
The Subcommittee on Insurance, Housing and Community Opportunity of the House Financial Services Committee, led by Rep. Judy Biggert, will start a new round of debates over how the nation prepares for floods, according to PCI. As the incoming chair of the subcommittee, Rep. Biggert introduced new draft legislation to reauthorize the NFIP for five years, demonstrating her continued leadership on major issues facing the nation.
Standing before Congress, Donna Jallick, VP of flood operations for Harleysville Insurance said, “Today, more than 5.6 million Americans depend on the NFIP to protect their homes and businesses. Last year, Congress allowed the NFIP to expire four times for a total of 53 days, and there have been 10 short-term extensions in less than three years. Lapses hurt consumers, millions of real estate professionals and our business.”
Harleysville Insurance participates in the “Write Your Own” (WYO) Coalition of private insurers that administers the NFIP. In her testimony, Jallick offered several narrowly targeted, consumer-focused improvements to the program, including indexing flood coverage for inflation and adding living expenses and business interruption to the available flood insurance.
“The WYO flood partners support the Subcommittee in advocating a straightforward bill, with a long-term extension, and no further lapses,” Jallick said. “We appreciate the bipartisan committee draft that addresses the critical vulnerabilities in the NFIP and will greatly strengthen flood protection for millions of consumers.”
Spencer Houldin, president of Ericson Insurance, an independent agent from Connecticut, chairman of the IIABA government affairs committee and the Connecticut representative on the IIABA Board of Directors, testified that the needed reforms include a long-term extension, removing subsidies and moving towards risk based rates on most properties, modernizing coverages and increasing maximum coverage limits.
Houldin said the program was far from perfect but that “it is also important to note that for almost two decades, up until the 2005 hurricane season, no taxpayer money had been used to support the NFIP; rather, the NFIP was able to support itself using the funds from the premiums it collected every year.”
He also praised Biggert’s draft legislation. The bill includes many of the provisions the IIABA supports to improve the NFIP. Independent agents serve as the sales force for the NFIP by working with the WYO companies, and provide a unique vantage point to discuss the program.
Sandra Parrillo, president and CEO of The Providence Mutual Fire Insurance Co. and chairman of NAMIC, addressed Congress, saying NAMIC believes there are significant problems with the NFIP as it is currently structured, and the best solution involves reforming and optimizing the program.
“The presence of a federal program is just as important today as it was 40 years ago,” Parrillo’s statement reads. “The phenomenon that led to the creation of the NFIP—the absence of a viable private flood insurance market—remains the fundamental problem, and there is no reason to believe that dismantling the NFIP would suddenly cause a private market to materialize. The NFIP fulfills an important role, and with the right mix of reforms, the program can begin to address the problems of adverse selection, moral hazard, and financial instability that have plagued it in the past. Therefore we believe that the best, most effective, and viable option is optimization—maintaining the current NFIP framework while implementing reforms that address existing weaknesses.”
