As the National Flood Insurance Program (NFIP) nears its expiration and reauthorization date, political pressure on the future of flood insurance is heating up.
The latest organization “sounding the alarm,” as their press release read, is the National Association of Realtors (NAR) which is lobbying government for greater private access but also public reauthorization.
A policy expert at the NAR, speaking on background, said if the NFIP isn’t reauthorized and is allowed to end policyholders would lose their insurance because they renew on an annual basis.
That possibility, the expert said, would hurt the housing industry because homes built on a floodplain with offers on the table couldn’t close sales due to their defunct policies.
Meanwhile, calls for greater privatization, in some cases for the NFIP being turned into an insurer of last resort, are growing louder from the insurance industry. Speaking on the NFIP’s reauthorization, John Dickson, President of National Flood Services (NFS) Edge Insurance Agency told
Insurance Business brokers should look for independent, fully private options for flood coverage.
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“Needs have evolved over time and I’m not sure the NFIP has kept pace for every need for every home and the private market is stepping in to do that today. So every day there are different options, different coverages, different products that help homeowners.” Dickson said.
NAR President, William E. Brown stated he was in favor of significant reform but not the complete dissolving of the NFIP. He explained the realtors’ organization isn’t lobbying for the NFIP to be reduced to an insurer of last resort either, because there isn’t enough capacity in the market. Instead, the NAR will lobby for policyholders’ ability to switch from the NFIP to private coverage and back again without any penalties - a long-standing issue with private flood insurers.
“Last year was the third largest claims payout year in NFIP’s history, costing more than $4 billion. While there were five billion-dollar floods, including Hurricane Matthew, four of the five were inland, and the largest single event was in Baton Rouge, Louisiana, in August, just one year out from the NFIP’s expiration date,” Brown said.
Dickson pointed to the Baton Rouge catastrophe as part of what’s wrong with the current system.
“North of 83% of the homes that were severely damaged by that event (in Baton Rouge), the homeowners weren’t insured for flood,” he explained. “It’s a travesty. It leaves many people severely impacted when a flood insurance policy would get them back on their feet again.”
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