Lawmakers and government officials are considering the possibility of overhauling the nation’s flood insurance distribution system, various news outlets are reporting.
Senator Kirsten Gillibrand of New York called to scrap the National Flood Insurance Program this week, due to allegations it underpaid and denied legitimate claims in the aftermath of Superstorm Sandy. That call was quickly echoed by other congressional democrats, including Senators Charles Schumer and Robert Menendez.
Lawmakers have not yet proposed an alternative to the system, however, saying they want to make sure Sandy victims are properly compensated before focusing on long-term reforms. There are currently 1,800 lawsuits filed by homeowners waiting to be settled, and FEMA is in the process of launching a process to reopen claims for the other 142,000 policyholders who were flooded in the 2012 storm. Menendez did hint earlier this month that possible reforms could include a change in compensation for insurers servicing NFIP policies.
“They take 30 cents of every premium dollar to sell and service policies,” said Menendez, publicly questioning whether insurers earned their average $1 billion profits through the program. “Policyholders aren’t always getting their money’s worth.”
The National Flood Insurance Program currently sells government-backed policies to home and business owners through approximately 80 insurance carriers and their affiliated agents. It was established in 1968 when private insurers decided writing flood coverage was too financially risky and the government began offering policies at subsidized rates. Today, the program is slowly increasing its pricing in order to bring rates up to an actuarial sound level. As it does so, private insurers are beginning to consider reentering the market.
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November 30, 2014 ---Private Flood Insurance Premiums are Falling
Flood insurance rates are falling.
Lloyd's of London and other private insurers have moved into the market, picking up customers stunned by rate hikes under the National Flood Insurance Program.
The decreases can be dramatic:
• For $146,000 of coverage on a house in St. Petersburg, the federal program quoted a renewal rate of $6,685. The Lloyd's rate: $1,367.
• For $188,000 of coverage on a St. Pete Beach home, the flood program rate: $9,004. The Lloyd's rate: $1,489.
• For $250,000 of coverage on a Tampa home, the flood program rate: $6,342. The Lloyd's' rate: $2,192
The emergence of private companies into the market could be a boon for thousands of Floridians who face huge rate increases under the federal program because their homes were built decades ago in low-lying areas.