President Obama Friday signed legislation rolling back theunaffordable rate increase imposed by the 2012 law that sought toachieve actuarial rates on National Flood Insurance Programpremiums.

But now the fun of implementing a law that is virtually certainto have unintended consequences will begin. The next step is todetermine how and when FEMA is going to implement it. 

In the middle are the Write-Your-Own insurance companies,two-thirds of which are members of the Property Casualty InsurersAssociation of America (PCI). Don Griffin, a vice president at PCIand chair of the WYO Flood Insurance Coalition, notes that renewalshave already gone out for people whose policies expire through lateMay and into early June. He says people whose policies startedexpiring last Oct. 1 through at least mid-June will be due refunds,which will be handled through FEMA.

But how FEMA deals with people whose policies expire after thatdate will depend on how rapidly FEMA issues bulletins or interimrules for the changes imposed by the new law, Griffinsays. 

FEMA did not respond immediately to requests forcomment. 

Griffin believes the first benefit will be for homeowners in theprocess of selling their properties. If these are properties withpre-FIRM policies—buildings constructed before the effective dateof the first Flood Insurance Rate Map (FIRM) for a community—thenthe new owner will be able to assume the existing policy withsubsidized rates on the property, rather than the "rate shock"under the 2012 law. Griffin says, though, that while the new ownerwill be allowed to retain the subsidized rate, the new law puts thehomeowner on a glide path toward full rates, which are limited to amaximum increase of 18% annually. 

Griffin also says WYO companies will have to get directions fromFEMA on rewriting the software for sending out new bills. "It willtake time for FEMA to work with the companies to make thosechanges, and FEMA, under the law, will then have to give the WYOcompanies six months to get them implemented," hesays. 

For example, Griffin said the changes required by the 2012 lawwere supposed to be completed in three months, but it took a yearand three months. And, Griffin said, despite criticism by consumergroups of administrative costs provided WYO companies by FEMA, theprogram is not a big money-maker for WYO companies. "What theindustry is paid to administer this program is based on the averagecosts to administer other property lines of business," Griffinsaid. 

He noted that, "If this was a really money-making line ofbusiness, there would be a lot more than 85 companies willing to doit." Currently, there are only a few companies for which this istheir sole line of business, primarily, Wright Flood, formerlyFidelity National, which is the largest single writer of floodinsurance. Assurant for example, the second largest writer of floodbusiness also writes a significant number of other products.

Griffin also said that two very large homeowners insuranceunderwriters, State Farm and Travelers, "have exited the businessover the last several years after they determined that thereputational risk and cost of doing it was too great. The costs toparticipate in this program for multi-line writers must beevaluated, as for many, it is an accommodation line of business,"he said.

Advertising and personal auto

The battle for market share in the auto-insurance business isheating up amongst the top players, according to a new study bySNL.

The report said Geico reduced growth in advertising spending in2012, but that it, Allstate and State Farm have increasedadvertising spending "dramatically" since 2009.

The report says Geico has been the leading advertiser amongstproperty and casualty insurers for at least five years through 2013and remains the only company that spends more than $1 billionannually on advertising. It recorded $1.18 billion in ad spend in2013, up from $1.12 billion in 2012, the report says.

The report also says Allstate has recently taken "direct aim" atGeico through its new Esurance subsidiary, which sells insurancedirectly to consumers through online and phone service.

The report says Allstate increased advertising spending 7% in2013 after an 11% increase in 2012.

It adds that Geico, Allstate and State Farm spent $1.78 billionon advertising as a group in 2009, which had increased to $2.87billion in 2013. The greatest increase was in 2010 and 2011,according to SNL. 

SNL says Geico spent in excess of 6% of its premium onadvertising in each year. Meanwhile, Allstate has grown thispercentage from 1.77% to 3.48%, while State Farm started just above1% in 2009 and has leveled off in the past few years to around1.6%, the report said.

The report says Geico has grown its market share "at a highrate" for more than 20 years, and that since 1996, after BerkshireHathaway acquired the shares of Geico it didn't already own, it hasgrown from the seventh-largest U.S. personal auto insurer to thesecond-largest U.S. personal lines auto insurer, with over $18.6billion in premiums in 2013. 

The report says Geico has been able to maintain a competitiveunderwriting margin while growing premiums, with SNL noting thatbetween 2009 and 2013, Geico maintained a much lower expense ratiothan its competitors even as it spent a higher percentage of itspremium on advertising.