FEMA Bans Insurance Rebating on NFIP Policies

Insurance agents selling flood-insurance policies will no longer be allowed to cede a portion of their commissions to property owners to induce them to purchase insurance, a practice known as insurance rebating.

The Federal Emergency Management Agency announced the new policy, which will be effective Oct. 1, in a bulletin issued April 4.

 The bulletin says the Federal Insurance and Mitigation Administration (FIMA) had received inquiries from interested parties regarding the practice.

According to an association notice provided to National Association of Professional Insurance Agents members, FEMA acted at the request of the association and individual agents,

According to several industry officials, the problem developed in Florida, where there is no anti-rebating law.

“After careful consideration, FIMA has concluded that the goals of the NFIP are better served by a system of uniform national pricing that will ensure that policyholders pay the same price for the same risk,” the FEMA bulletin says.

It adds that FEMA does not directly regulate insurance agents who sell Standard Flood Insurance Policies, but that it does administer the National Flood Insurance Program and sets standards governing the activities of participating WYO Companies related to the sale and marketing of flood insurance.

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