Big ‘I’ Says Reform Needed for National Flood Insurance Program

July 12, 2005

The Independent Insurance Agents & Brokers of America (the Big “I”) praised the House Subcommittee on Housing and Community Opportunity for holding a hearing on the future of the National Flood Insurance Program (NFIP).

The Big “I” supported the Flood Insurance Reform Act (FIRA) of 2004, but has expressed concerns that certain areas of reform were not addressed in the law, which reauthorized the NFIP for five years.

First, the Big “I” respectfully suggests that Congress should address a requirement for mandatory disclosures by the Federal Emergency Management Agency (FEMA) of flood information prior to any property purchase, with the creation of an accessible electronic database of flood losses.

“Buying a home is perhaps the most important investment an individual or family will ever make,” said Charles E. Symington Jr., Big “I” senior vice president of government affairs and federal relations. “Our association and its 300,000 members strongly believe FEMA must ensure that property-buyers are given the right tools to protect themselves, prior to purchase, against any unexpected consequences.”

Second, the Big “I” believes there is a need for strengthened NFIP building regulations. Stronger regulations would require communities to ensure that new construction in flood plains includes safeguards against flood damage and that substantial improvements be made to existing buildings within flood plains.

“Experience clearly shows that sensible, common-sense building regulations work,” Symington said. “Structures built to NFIP construction standards are as much as four times less likely to suffer flood losses, and this is good for both property owners and insurers.”

Additionally, the Big “I” suggests a proposed FEMA rule designating independent property/casualty agents as “agents of insureds,” rather than allowing the private sector to make this determination could be detrimental to some agents, brokers and consumers.

“This change would shield private insurers from liability for their own errors, which could leave agents and brokers culpable for errors that are not their fault,” said Patrick O’Brien, Big “I” director of federal government affairs. “This inevitably would increase their liability exposure and cost of doing business by making it more difficult to secure errors-and-omissions coverage or increasing premiums for their businesses. These increased costs have to be accounted for someplace in the system, and it is the consumer ultimately who is left holding the bag.”

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