Friday, September 1, 2017

Federal Flood Insurance Program Set To Expire On Sept. 30 Without Action By Congress

Acting Insurance Commissioner Jessica Altman urged Congress to include provisions specifically supporting private market residential flood insurance as it works on the reauthorization of the National Flood Insurance Program which is set to expire on September 30.
She made her remarks at a meeting of the SEDA-Council of Governments meeting in Lewisburg, Union County on Thursday.
“The Wolf Administration has been educating homeowners, renters and condo owners concerning private market flood insurance options for the past year and a half, and has found in many cases that comparable private coverage is much more affordable than what is available through the NFIP,” Acting Commissioner Altman told a group of nearly 100 residents in Lewisburg, Union County.  “I encourage consumers to visit our one-stop-shop flood insurance webpage, where we list insurers and agents selling private flood coverage in Pennsylvania.  After that, it’s a good idea to make some calls to see if a better deal is available for them in the private market.”
Acting Commissioner Altman told the audience that in the first year the Insurance Department flood insurance webpage listed private options, the number of private, residential flood policies more than doubled—from 1,500 to more than 3,300.  
But, she said, Congress needs to put support for private coverage in law as part of the NFIP reauthorization bill.
The NFIP was created in 1968 to provide flood coverage for high-risk properties and included significant subsidies for these properties.  
Huge numbers of claims following Hurricane Katrina and Super Storm Sandy contributed to the NFIP falling $24 billion in debt, and Congress passing a series of laws that are phasing out the premium subsidies over time.  
The potential impact of Hurricane Harvey in Texas and Louisiana could make this problem even worse.  
As NFIP premiums rise to approach the cost of insuring the actual risk each property presents, the private market is entering the residential flood insurance market because it can now compete with the NFIP.
“Specifically, we need Congress to make private flood coverage that is comparable to the NFIP acceptable for federally backed mortgages.  Lenders need to know this insurance is good coverage and they should accept it,” Acting Commissioner Altman said.  “We also need Congress to require the NFIP to allow homeowners to switch to a private policy from an NFIP policy during the policy year, with no penalty, and receive a pro-rated refund of their NFIP premiums covering the remainder of the year.  Bottom line, if a consumer finds a better deal they should not be penalized for taking it.”
Acting Commissioner Altman also said Congress needs to remove the current prohibition on insurers who sell NFIP coverage from also selling their own, private coverage.  She said this would be another stop in ensuring consumers can get the best deal for their insurance dollar.  
Noting homes located in a “Special Flood Hazard Area (SFHA)” are required to have flood insurance if the home’s mortgage is backed by the federal government, Acting Commissioner Altman said homeowners outside of SFHAs may also want to consider this coverage.
“Even if your home is not in an area that requires flood insurance, I encourage you to think about getting this coverage,” Altman said.  “Within the past 10 months, we have had two severe rainstorms, one in Centre County and one in Dauphin County, which resulted in significant flooding to scores of homes and businesses in each case, and these areas lie largely outside of special flood hazard areas.”
Acting Commissioner Altman said many people mistakenly believe standard homeowners insurance covers flooding, but it usually does not.  She added that private market flood coverage for homes outside SHFAs that typically do not flood may be very reasonably priced.
Two other points Acting Commissioner Altman made to the audience are that communities need to make sure they inform the Federal Emergency Management Agency, which handles flood mapping across the country, when flood control projects are done.  
FEMA has told the Insurance Department there have been instances in which a community completed a flood control or mitigation project but never told FEMA.  So areas that may have been removed from a SFHA by the project were left in this designation by FEMA.
Acting Commissioner Altman also urged Congress to include a fee on private flood insurance policies, like the one assessed on NFIP policies, to fund flood mitigation grants for homeowners.  
Flood mitigation work includes moving utilities to higher levels within a home, or placing a home on stilts.  Federal grants for these projects are now only available to homeowners with NFIP plans.
“NFIP coverage will still need to be available as an insurer of last resort, as private insurance will not cover higher-risk properties.  But competition is good for consumers, and for those properties at lower risk, the private market can be a more affordable option,” Altman said.
Altman encouraged those in attendance to contact their U.S. Congressional representative and senators and ask them to include private flood coverage in their NFIP reauthorization bill.
Visit the Department of Insurance’s Flood Insurance webpage to review your options.  Reminder: Flood insurance policies generally have a waiting period of 30 days before a claim can be filed.  Be sure to ask about any waiting periods.
(Photo: Hurricane Agnes (a 300-year storm) flooding downtown Wilkes-Barre 1972.)
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