Members of PIA Northeast Advocate for NFIP Reforms

This week, the PIA of New Jersey, PIA of New Hampshire and PIA of Connecticut met with their respective congressional offices as part of PIA’s 2022 series of year-round, state-specific advocacy events that offer agents the chance to meet with federal policymakers on the issues that matter most to them. Throughout the year, PIA members from across the country will spend their 2022 Advocacy Days similarly engaging with lawmakers on one or more of PIA’s 2022 Issues of Focus. PIA of New York will hold their Advocacy Day in July.

Long Term Reauthorization of Flood Program Needed

PIA members noted the recent history of stalled efforts to reauthorize the NFIP on a long-term basis. On September 30, 2017, with the NFIP about to expire and no agreement in Congress on a long-term reauthorization, Congress had to extend the program on a short-term basis to prevent a lapse. The NFIP is now on its 20th short-term extension since September 30, 2017. Its most recent short-term extension means the program will expire again on September 30, 2022. PIA has continuously worked with Congress to urge passage of stopgap measures to prevent a lapse in the program.  

PIA members asked policymakers for a long-term reauthorization of the NFIP that includes important reforms, such as continuous coverage protection for policyholders who move their flood coverage from  the NFIP to the private market and later seek to return to the NFIP; increased cost of compliance coverage for policyholders and flexibility for pre-flood mitigation; and the creation of a Federal Flood Insurance Advisory Committee with PIA representation.

These reforms are among those included in PIA-supported legislation that passed the House Financial Services Committee in 2019 and the draft legislation released by the House majority in 2021. PIA believes this legislation is the basis as the way forward for a long-term NFIP reauthorization.

Preventing a Cut in Agent NFIP Commissions

Perhaps most importantly, PIA members discussed the need to maintain the Write Your Own Reimbursement rate at its current level of 29.9 percent. The WYO reimbursement rate is the vehicle by which independent agents are compensated for selling NFIP policies. Carriers pay agent commissions out of their WYO reimbursement rate proceeds; any cut to the WYO reimbursement rate would force carriers to pass these cuts on to agents. Insurance agents play a crucial role in explaining this complex program and meeting their clients’ needs during the initial sales phase, throughout the renewal period, and, most meaningfully, in the aftermath of a flood loss.

Cutting independent agent commissions will lead this vital sales force to stop selling NFIP policies and will discourage future agents from starting. The combination will result in a decrease in the number of flood policies in force at a time when increasing the flood insurance take-up rate should be a universal priority. PIA will oppose any NFIP reauthorization effort that cuts the WYO reimbursement rate; we were pleased that there was no cut included in the recent 2019 bill that passed the House Financial Services Committee.

Risk Rating 2.0

PIA members also gave on-the-ground reports of Risk Rating 2.0, which PIA supports, and its impact on consumers. RR 2.0 assigns premium rates to individual properties using substantially more granular data, aligning rates more closely to each property’s actual level of flood risk.  RR 2.0 was implemented as to all new policies and some existing policies this past October 1, 2021. Remaining renewals began transitioning to RR 2.0 on April 1, 2022.

PIA supports affordability efforts for certain flood consumers to alleviate some of the effects of the increased rates. PIA believes RR2 will in the long term ensure a fiscally healthier and improved NFIP program, but an affordability effort must be part of the solution.