New bill eases homeowners’ penalty
The U.S. House of Representatives is trying once again to fix a major roadblock that has prevented some homeowners from shopping around for private flood insurance as an alternative to their National Flood Insurance Program (NFIP) policies. It allows private carriers to better compete by satisfying the NFIP’s continuous coverage requirements.
H.R. 4699, the Continuous Coverage for Flood Insurance Act, is sponsored by Rep. Kathy Castor (D-FL) and Blaine Luetkemeyer (R-MO). It would prevent FEMA from penalizing homeowners who elect to purchase flood insurance outside of the NFIP.
“American consumers should have the right to decide what flood insurance policy best fits their specific needs, whether it be an NFIP or private sector policy. Penalizing policyholders who have maintained continuous flood coverage just because they explored options in the private market is nonsensical,” said Rep. Luetkemeyer, in a press release.
This bill would fix a long-standing problem that we’ve written about many times in the pages of this newsletter. Currently, when a homeowner gives up their NFIP coverage for a private market policy and later may decide to switch-back to an NFIP policy, the NFIP penalizes them by re-setting their previously grandfathered rate to the full NFIP market rate. The bill would preserve that grandfathered rate. It specifically addresses lapses in new rules that took effect in July 2019 that allowed federal lending institutions to accept private insurance to satisfy NFIP mandatory purchase requirements for properties in high-risk flood zones. As Rep. Luetkemeyer further commented, “Competition can bring lower prices and broaden the insurance pool to help reduce flood insurance rates that threaten hardworking families and small businesses.” We say Bravo!
There are remaining obstacles in allowing transfer of needed flood protection from the NFIP to the private marketplace. They include the current rule where homeowners do not get a refund of their unearned NFIP premium if they switch policies before the end of their annual term. LMA will continue to advocate for elimination of this and other burdensome bureaucratic rules.
For more information and resources on Florida’s thriving private flood insurance market, check out our LMA Flood Insurance & Resilience webpage.
LMA Newsletter of 8-9-21