This week, several members of Congress from both the U.S. Senate and the U.S. House of Representatives introduced legislation to reauthorize the National Flood Insurance Program (NFIP) for five years while also making several troubling changes to the program.

Sen. Bob Menendez (D-New Jersey) is the lead sponsor of the “National Flood Insurance Program Reauthorization Act of 2021" in the Senate with nearly ten Senators from both sides of the aisle as original cosponsors. In the House, Reps. Frank Pallone (D-New Jersey), Bill Pascrell (D-New Jersey) and Clay Higgins (R-Louisiana) are the lead sponsors of the legislation.

The legislation would cap NFIP annual rate increases at 9%. Currently, NFIP rate increases are capped at 18%. Flood insurance affordability is expected to play a larger role in congressional discussions on reforming the NFIP during the ongoing implementation of Risk Rating 2.0.

The legislation also includes several controversial items that would damage the goal of increasing take-up rates in both the NFIP and the private market. Notably for Big “I" members, the legislation would cap Write-Your-Own (WYO) compensation at 22.46% of written premiums. Currently, WYO insurance companies receive roughly 30% to administer the NFIP. WYO companies pay insurance agents, vendors and state premium taxes, among other costs, from the allowance they receive. A reduction of this amount will undoubtedly lead to agent commission reductions. However, to alleviate these cuts, the legislation does include a provision that requires insurance companies to pay agents a minimum commission of 15%.

Additionally, the legislation would require FEMA to expand its introductory agent training class to include all agents who work with the NFIP direct program and WYO companies. The legislation would also require each insurance agent who sells flood insurance policies under the program to complete a three-hour continuing education course every two years that is approved by the insurance commissioner of the state in which the agent is a legal resident.

The legislation would also establish an agent advisory council consisting of 11 members of federal, state and local experts to make recommendations to FEMA on improving the customer service, including but not limited to the application and claims process, agent training needs and delivery. The legislation makes clear that two of the 11 members of the agent advisory council shall be members of the Big “I." 

Read a section-by-section overview of the bill.

Wyatt Stewart is Big “I" assistant vice president of federal government affairs.