On Tuesday, the House voted 306-91 in favor of legislation thatwould reduce the rate increases taking place under the NationalFlood Insurance Program (NFIP). The measure, which proceeds next tothe Senate, has not been without controversy.

Lawmakers have faced mounting pressure to rescind a recentlyenacted overhaul of the NFIP since homeowners inflood-prone areas complained about sharp premium increases. For itspart, the insurance industry is expressing mixed reactions. TheIndependent Insurance Agents and Brokers of America contends thatprovisions of the bill constitute "a major win" for independentinsurance agents, while another representative of agentsis voicing skepticism.

PIA, NAMIC and PCI Weigh In

The National Association of Professional Insurance Agents (PIA)says it is concerned that delaying risk-based rates, whileproviding much-needed relief for many homeowners, does not addressthe underlying long-term problems of adequate rates andaffordability.

H.R. 3370, the Homeowners Flood Insurance Affordability Act,"applies a Band-Aid—one that is necessary in some cases—but doesnot attempt a cure," PIA says. Moreover, officials at theNational Association of Mutual Insurance Companies (NAMIC) chargethat the House has "overreacted" in approving legislation that"undo much-needed reforms to the National Flood Insurance Programadopted less than two years ago."

Charles Chamness, NAMIC president, is quick to pointout that criticism of the 2012 law is coming from "less thanone-tenth of one percent of American homeowners."

Nat Wienecke, senior vice president, federal governmentrelations for Property Casualty Insurers Association of America(PCI), says the House bill will address "some of the 'unintendedconsequences' impacting flood insurance policyholders followingenactment of B-W."

Wienecke thanked Congress for working with the industryto address the technical and timing realities of implementing anyprogrammatic changes to the NFIP, "ensuring a thoughtful andtransparent implementation process for policyholders and otherstakeholders."

"We will continue to work with Congress on the long-termaffordability and availability of flood insurance, as well as thelong-term financial soundness of the NFIP," Wienecke says.PCI members include more than two-thirds of the insurers thatpartner with the NFIP through the Write-Your-Own (WYO) program.

"One of the fundamental purposes of government is to protecttheir citizenry," adds Steve Ellis, vice president,Taxpayers for Common Sense, on behalf of SmarterSafer.org. "Whatyou have with flood insurance is, we're providing subsidies thatare encouraging people to build and to live in harm's way."

At the same time, an industry lobbyist says Sen. RobertMenendez, D-N.J., primary sponsor of "companion" Senate legislationapproved by that body on Jan. 30, is already calling the bill,"Menendez-Grimm," named after Menendezand Rep. Michael Grimm, R-N.Y., another primary sponsor of theHouse bill.

"It is pretty clear that the Senate is going to take up theHouse bill and pass it," the lobbyist said. Although thelobbyist is "not sure exactly when that willhappen," he adds that Sen. Harry Reid, [D-Nev.,Senate majority leader] will get it on as soon as "[Reid]finds a way to allow Sen. Mary Landrieu, D-La., to take credit forgetting it done."

"Although the President has taken a position against the bill,there is no chance that he will veto it," the anonymous lobbyistadds.

Communications with FEMA

Another industry lobbyist notes there are "very clearrequirements" in the bill for the Federal Emergency ManagementAgency (FEMA) to consult with the industry on implementation duringthe regulation-making period. The lobbyist said there is also the6- to 8-month implementation timeframe for the WYOs.

The lobbyist says "vendors and WYOs are still concernedthat there is no compensation for the millions of dollars ofadditional information technology costs that will result from thisnew bill," while adding that [they] "aredisappointed that the bill includes the directive to FEMA to offermonthly installments but does not authorize the WYOs to charge anyper installment fee for such payment arrangements."

"The key for the vendors and the WYOs will be to get in earlywith FEMA and work as partners to implement the new law (and unwindthe old Biggert-Waters Act of 2012)," the lobbyist explains."Historically, FEMA has been very poor at communicating with theprivate sector partners that actually operate the program (vendorsand WYOs). "This must change or the implementation ofMenendez-Grimm will be as grim and disastrous asB-W."

Reinstating Flood Insurance Subsidies

As far as reactions go, Robert Rusbuldt, IIABA president & CEO, says the bill "aims toreduce some of the harmful effects of B-W without undoing thenumerous positive provisions within the law." 

Rusbuldt explains the bill would repeal the entirety ofSec. 207 of B-W and would therefore reinstate the "grandfathering"of policies located in communities with a new or redrawn map. Headds the bill would also halt the elimination of subsidiesfor pre-Flood Insurance Rate Map (Pre-FIRM) properties that arebought and sold, "which is an extremely problematic provision inSection 205 of B-W."

Charles Symington, IIABA senior vice president for external andgovernment affairs, said the bill "represents a major win forindependent insurance agents, as Section 207 and the bought/soldprovision of Section 205 were the two specific items that the IIABAhas been working on with Congress to find a solution."

He urges Congress to "quickly resolve the differences betweentheir two version of flood insurance reform in order to providemeaningful relief to consumers harmed by the drastic priceincreases associated with Biggert-Waters."

Chamness, for NAMIC's part, says resolving those few cases whererate increases far exceeded what was anticipated by the 2012reforms to the NFIP "quickly became a choice on Capitol Hillbetween good policy and good politics, and unfortunately, but notsurprising in an election year, politics won the day."

Chamness adds that the House vote means that it "joins theSenate in stepping away from much-needed reforms that would makethe NFIP sustainable for future generations, and instead chose toprovide cheap flood insurance coverage to small minority ofproperties at the expense of everyone else."

Jimi Grande, senior vice president of federal affairs at NAMIC,says repealing reforms could actually make future flood claims morelikely, and losses more severe.

"Those with subsidized rates lose any incentive to protectthemselves from flood damage," he said, "and in the meantime untilthe program's reserves reach adequate levels, the taxpayer willstill be on the hook to make sure the NFIP can pay claims aftermajor storms."

Ellis warned that over time, the more that flood risk becomesdistanced from rates, "you're artificially holding down rates.

"While we know with sea level rise and other impacts, risk isincreasing, so the pressures on this program are going to be evengreater. It's going to have bigger and bigger losses, Ellissaid.

He said that, ultimately, the House bill would affect eventuallyevery policy in the program because you're grandfathering the oldmaps, "so as they do new maps and they're finding out new risk,they're actually holding them in, the old map and the old floodplain."