The U.S. Senate Committee on Banking, Housing and Urban Affairs held a hearing May 18 on the reauthorization of the National Flood Insurance Program, and the National Association of Professional Insurance Agents submitted testimony urging the committee to pass a long-term reauthorization.
The NFIP’s most recent five-year reauthorization expired on Sept. 30, 2017. Since 2017, there have been 16 extensions of the NFIP for varying lengths, and some of the shortest extensions resulted in three brief NFIP lapses within a three-week period in early 2018. The NFIP has not been reauthorized for longer than its current one-year extension since its last five-year extension was passed in 2012.
The NFIP’s current authority expires on Sept. 30, 2021.
This relatively early attention to the NFIP by the Senate Banking Committee is a positive sign that this Congress may try to pass a long-term reauthorization before the NFIP’s expiration later this year, Jon Gentile, PIA vice president, government relations, said in a PIA Advocacy Blog.
During the hearing last month, the committee heard an inaccurate characterization of agents’ commission structure and the work required of independent insurance agents, which prompted PIA National to submit supplemental testimony to correct the error of Rebecca K. Sternhell, director of federal affairs for New York City, who stated that agents earn a 30 percent commission on NFIP policies. She urged Congress to look at the current compensation structure “to ensure that it aligns with actual work on policy issuance.”
In its supplemental testimony, PIA National said that Sternhell “apparently conflated two different entities, both of which contribute to the value policyholders receive when they purchase an NFIP policy.” The first is the Write-Your-Own (WYO) insurance carrier, which receives a 29.9 percent reimbursement from the federal government for writing and servicing NFIP policies. The second is the independent insurance agent, whose commission is paid by the WYO from the 29.9 percent reimbursement it receives. “Neither the WYO nor the agent retains the full 29.9 percent payment—not in the year the policy is initially issued and not in any subsequent year.”
Most policyholders are unaware of the work independent agents invest in them throughout the policy year, which PIA detailed in its supplemental testimony. Perhaps most importantly for consumers, PIA wrote, independent agents stand with their policyholders after a flood event, even when that event also affects their own homes and businesses.
PIA National took issue with Sternhell’s opinion that renewals are, effectively, automatic and “as easy as emailing a document for electronic signature.”
PIA concluded its testimony by offering the testimony of “a seasoned group of knowledgeable” agents who sell NFIP products every day.