The House voted on Tuesday to reauthorize and reform the taxpayer-backed National Flood Insurance Program (NFIP) to strengthen its financial position.
The House voted 237-189 in favor of the 21st Century Flood Reform Act (H.R. 2874), which would reauthorize the NFIP for five years, introduce private market competition, and provide reforms to help policyholders.
The NFIP was established in 1968 to provide government flood insurance for homeowners and businesses. However, the program has borrowed over $35 billion from taxpayers and operates a $1.4 billion annual deficit.
“There are a lot of good reforms in this bill for both taxpayers and ratepayers,” Financial Services Committee Chairman Jeb Hensarling (R-TX) said. “It is an absolutely revolutionary reform that we can break open the government monopoly and bring in market competition, innovation, more affordable rates for so many.”
With competition and more options, more people will have access to flood insurance, he added.
“We have to realize if we’re going to make this program sustainable we cannot have 1 percent of the properties causing 25 percent of the losses. Ultimately, if all we do is rebuild the same properties in the same fashion in the same location, that is neither wise nor compassionate,” Hensarling stated.
Among the reforms, the 21st Century Flood Reform Act will expedite the implementation of policyholder monthly installment payments; establish a flood damage savings account for policyholders to facilitate the reduction or elimination of NFIP premiums; modernize FEMA’s approach to designating and addressing multiple-loss properties; provide greater private market access, competition and consumer choice; allow localities to develop their own map alternatives to the NFIP flood map; and formalize an appeals process for consumers when they dispute their claims.
The Property Casualty Insurers Association of America (PCI) generally supports the plan to reform and reauthorize the NFIP.
“Nearly 5 million American consumers rely on the NFIP to protect their homes, properties, and businesses,” Nat Wienecke, senior vice president, federal government relations at PCI. said. “A long-term reauthorization is needed to provide consumers and markets with reliability and stability when it comes to flood insurance coverage.”
He said it includes several important reforms that reduce costs and increase options for consumers.
“PCI, however, is concerned that the bill would make cuts to the Write Your Own (WYO) companies that partner with FEMA to administer the NFIP,” Wienecke said.
The WYO companies are currently servicing 120,000 flood claims from Hurricanes Harvey, Irma, Maria, and Nate. Since 2004, the number of private Write Your Own insurers has declined from 107 to fewer than 70, more than a 35 percent drop.