Agents Call for Improvements to Federal Flood Program

October 20, 2005

The National Association of Professional Insurance Agents (PIA) filed comments this week with House and Senate committees holding hearings on the National Flood Insurance Program (NFIP), making a series of recommendations to improve it.

Hurricanes Katrina and Rita have prompted discussion of the best way to insure properties against damage from flooding. A hearing was held Oct. 18 by the Senate Committee on Banking, Housing, and Urban Affairs and a separate hearing is scheduled before a subcommittee of the House Financial Services Committee today.

Among the five specific preliminary recommendations by PIA National: an increase in building property insurance limit maximums; a system of automatic coverage for contents in non-commercial properties; adding or coordinating flood coverage for commercial policies in the area of business interruption insurance; to separate insurance under NFIP from post-disaster government assistance; and continued multi-year authorization of the flood program by Congress for its various authorities.

In addition, PIA claims a recently proposed NFIP after-the-fact insurance buy-back offer from Congress is problematic.

Among PIA’s Recommendations:

Increase NFIP building property insurance limits maximums for all classes of property able to be insured. PIA claims that current limits are increasingly inadequate and with today’s values and adjusting for inflation since 1968, provide less real dollar coverage.

For non-commercial properties, PIA suggests that NFIP consider including automatic coverage for contents per some percentage of the building amount insured for flood. Currently, building/residence contents are not covered in an NFIP policy unless the insured specifically decides to include that coverage and cost in their NFIP policy. Most all in the NFIP program have building coverage, but fewer than should have contents coverage

PIA also suggests that the NFIP should consider adding or coordinating flood coverage for commercial policies in the area of business interruption insurance. Business interruption coverage is now only available in the private sector property market on a covered peril basis. Flood is not a covered peril in the private sector.

PIA also recommends a five-year NFIP authorization is necessary. Currently the NFIP is authorized until Dec. 31 of 2008.

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