It’s no secret that flood insurance premiums are reaching heights generally only seen by those scaling Mount Everest. Thanks to the Biggert-Waters Act of 2012, flood insurance policyholders in the Southern and Northeastern US are already starting to see rate increases of up to 1000% to 3000%.
In an effort to delay such unaffordable rates, backers of Senate legislation that would halt most premium increases for four years
have signaled readiness to vote on the bill this week. Senate Majority Leader Harry Reid has promised to work to ensure the unanimous consent required for a quick up-or-down vote, but Minority Leader Mitch McConnell signaled that some Republicans might object.
If the effort fails, producers and policyholders banking on the legislation will have to wait until after the Christmas-New Year’s congressional recess to see resumed action.
Some state legislators, however, are not waiting around. In Florida, state Senator Jeff Brandes is preparing to introduce a bill that would make it easier for private insurers to write flood policies—a move he said will increase affordability for homeowners.
“Homeowners in my area are seeing radical increases in flood insurance premiums, so much so that it will be unaffordable for them to maintain their current mortgage or ever sell their property,” Brandes said. “[Private insurers] have flexibility. They have competition. Those are two big things that haven’t existed in flood insurance in a long time
Brandes said market-created flood insurance options would be more fiscally and actuarially sound, and—due to competition from other carriers—more affordable.
And not only would policyholders benefit from greater market competition, Brandes believes producers would see some positives as well.
“Brokers will be able to use their judgment and evaluate ratings of the firm and the reputation of the firm, and make market-based decisions about what’s best for their clients,” he said. “If anyone has any concerns about the sustainability of the product, there will always be an NFIP product.”
Brandes said he hoped his bill, which streamlines the process for applying to write flood policies in Florida, would eventually become a national model for a private flood insurance market. Having met with several carriers while writing the legislation, Brandes believes most insurers will jump at the chance to enter the market.
The National Council of Insurance Legislators (NCOIL) lent its support to Congressional efforts to delay flood insurance premium increases in November, but Brandes said he has “abandoned all hope” of a federal fix.
“I think the best we can hope for is a delay in the implementation of some of the rates, but a delay doesn’t help homeowners,” he said. “When a realtor is asked, ‘What is my rate going to be in three years?’ the realtor will say ‘I don’t know.’ That’s a tough place to be if you’re buying a home.”