The insurance companies that administer the National Flood Insurance Program painted a dire picture Tuesday of the consequences of reversing any of the rate increases now being implemented as a result of the 2012 law that mandated that the program charge actuarial rates to customers.
The letter was written by Donald Griffin, a vice president at the Property Casualty Insurers Association of America who specializes in flood issues, on behalf of the approximately 84 so-called Write-Your-Own insurance companies.
They market NFIP policies, handle the billing and other paperwork, and also help the Federal Emergency Management Agency deal with claims.
They deal with all but approximately 850,000 of the 5.6 million NFIP customers. The rest are handled by a separate vendor on behalf of FEMA as NFIP-direct.
The companies said that before Congress decides to revise the rate increase programs required under the Biggert-Waters Act of 2012 it "must realize and acknowledge" that any changes will take no less than six months for WYO insurers to implement.
"We hope that any proposed legislative changes would be discussed with the NFIP and other stakeholders as they are being developed to avoid further unintended consequences," the letter said.
"While we understand that modifications may need to be made to Biggert-Waters, they should be carefully considered to avoid causing even more confusion for the 5.6 million consumers relying on the stability of the NFIP."
The WYO insurers said that this is because of legal mandates that have already been implemented.
The letter said that "to reverse any such changes would require regulatory guidance and many system and business changes."
The letter was written against the background of legislation proposed in the House and Senate that would delay most of the increases for up to four years. It was released at a hearing on the issue held by the Insurance and Housing Subcommittee of the House Financial Services Committee.
It came as Sen. Mary Landrieu (D-La.) said she and 22 other senators are working to get their bill, S. 1610, attached to the legislation reauthorizing the National Defense Act that is now being considered in the Senate. Companion legislation is pending in the House; it has 110 co-sponsors.
NAFCU has come out in support of the bill from the credit union industry perspective.
"This unavoidable implementation delay will necessarily create confusion and potential lapses in the marketplace unless the legislative changes are properly timed, carefully drafted and clear guidance from Congress is provided on how policyholders are to be treated during the interim period," the WYO letter said.
The letter said that the NFIP will also need to give clear requirements to WYO insurers on the implementation of any changes and the treatment of those policyholders.
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