Insurance industry trade groups had a mixed reaction to legislation introduced last week in the House of Representatives to reform the National Flood Insurance Program, warning the bill could significantly boost costs.
The legislation is similar to a bill passed by the House last year that failed to win support in the Senate (which adjourned before acting on it), and a different bill reported out by the Senate Banking Committee.
The Property Casualty Insurers Association of America said the positive aspects of H.R. 1682–the Flood Insurance Reform and Modernization Act of 2007–includes an increase of $725 million (to $21.5 billion) in NFIP borrowing authority.
The bill also increases funding for mitigation programs and mapping updates, and supports greater outreach to homeowners to encourage the purchase of flood insurance policies.
However, PCI officials said the bill could also add significant paperwork, claims and litigation expenses “to the already struggling program, creating additional costs for taxpayers.”
Ben McKay, PCI's senior vice president for federal government relations, said of particular concern is a provision that would triple the time period–from 60 to 180 days–for policyholders to file proof of loss.
“This provision could add significant costs, both immediately and in the future, with such additional costs ultimately to be borne by taxpayers,” he said.
Justin Roth, senior director of federal affairs for the National Association of Mutual Insurance Companies, sees the bill as a positive, in particular hailing the decision to charge actuarially based rates for second homes.
“It is unconscionable that American taxpayers currently subsidize flood insurance premiums for people who can afford to purchase vacation homes in disaster-prone areas,” he said. “We believe eliminating this subsidy is an important provision.”
Mr. Roth also said NAMIC is pleased the bill raises NFIP borrowing authority, allowing it to pay all flood claims arising from 2005's storms.
“We believe Congress must act responsibility to insure that those homeowners who did the right thing and purchased flood insurance are compensated so they can pick up and rebuild their lives as quickly as possible,” he said.
The legislation is sponsored by Reps. Barney Frank, D-Mass.; Judy Biggert, R-Ill.; Gene Taylor, D-Miss.; and Richard Baker, R-La., among others.
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