NCOIL Adopts Private Primary Residential Flood Insurance Model Act

By Staff Reports

At the National Council of Insurance Legislators “Summer” Meeting in Alexandria, Va., the organization adopted the NCOIL Private Primary Residential Flood Insurance Model Act sponsored by Florida Rep. David Santiago and NC Sen. Vickie Sawyer.

The measure passed on a voice vote by the NCOIL Special Committee on Natural Disaster Recovery and is expected to be affirmed by the Executive Committee when it convenes in two days.

NCOIL President Matt Lehman (Rep. – IN) stated, “This Model is extremely critical and timely as the nation is amid hurricane season. As of September 14th, just last week, the National Hurricane Center has named 20 storms in just over three months. The Hurricane Center literally just recently ran out of traditional names for storms and had to use the Greek alphabet to name subtropical storm Alpha. With several weeks to go in the 2020 hurricane season, it is our responsibility as state legislators and for those of us insurance agents to make more options available and be transparent with consumers on their financial plan. Many homeowners do not realize that flood insurance is not already part of their policy. Natural disasters cannot be controlled, but there is control over protection for the potential immense destruction and loss.”

The NCOIL Special Committee for Natural Disaster Recovery first met at the 2019 Spring Meeting in Nashville. Over a dozen legislators from 13 states serve on the Committee representing coastal and inland states that have suffered flooding, hurricanes, tornadoes, and wildfires in the past few years.

NCOIL 2019 President, LA Senator Dan “Blade” Morrish appointed NC Senator Vickie Sawyer as the Committee Chair during an interim call of the Committee in June 2019. Additionally, during that interim call, the Committee heard from legislators and interested parties on the best course of action regarding the private flood insurance market.

NC Sen. Vickie Sawyer stated, “I greatly appreciate the opportunity to join the NCOIL leadership team and to work with the committee on an issue where I have personally seen such devastating effects in my home state. As an insurance agent, state Senator, and resident of a coastal state, I see all too often that we need solutions to help communities after a natural disaster. I am honored to have been able to chair the committee and sponsor the Private Primary Residential Flood Insurance Model Act.”

The initial drafting discussion for the NCOIL Private Primary Residential Flood Insurance Model began at the 2019 Spring Meeting, previously taking the form of proposed amendments to an existing NCOIL Model Act - the NCOIL State Flood Disaster Mitigation and Relief Model Act. The Committee then decided to develop a standalone Model Act, initially titled the NCOIL Private Flood Insurance Model Act. The Model is based partly on existing Florida legislation that has proven to be very successful in facilitating expansion of the private flood insurance market.

During the drafting discussions, NCOIL legislators and staff heard from a wide array of interested parties including: Federal Emergency Management Association (FEMA), National Association of Mutual Insurance Companies (NAMIC), American Property Casualty Insurance Association (APCIA), National Association of Realtors (NAR), Lisa Miller & Associates, Independent Insurance Agents and Brokers of America (IIABA), Reinsurance Association of America (RAA), State Farm Insurance Company, United Policyholders (UP), National Association of Insurance Commissioners (NAIC), Farmers Insurance Group, Center for Economic Justice (CEJ), National Association for Professional Insurance Agents (NAPIA), Wholesale and Specialty Insurance Association (WSIA), and others.

The purpose of the Model is “to provide protection of lives and property from the peril of flood,” and is “designed to encourage a robust private primary residential flood insurance market to provide consumer choices and alternatives to the existing National Flood Insurance Program (NFIP).

Highlights of the Model include: a recommendation that states utilize a “use and file” or “file and use” rate filing system for private flood insurance coverage; a requirement that an insurer must attest that the rates are based on actuarial data, methodologies, standards, and guidelines relating to flood that are not excessive, inadequate, or unfairly discriminatory; and a recommendation that states do not impose greater filing requirements for private flood insurance form filings than the State requires for other property lines of insurance.

The Model also requires important disclosures to be made to consumers such as: a requirement that if a consumer currently has no coverage under the NFIP, the consumer must be informed of the existence of the NFIP before placing the consumer application with private flood insurance; and that all consumers, including those that currently have coverage under the NFIP, must be informed that the coverage under the NFIP may be provided at a subsidized rate and that the full-risk rate for flood insurance may apply to the property if the applicant later seeks to reinstate coverage under the program.

The Model also sets forth that a state’s diligent effort law shall not apply to flood coverage under an insurance policy issued by an eligible surplus lines insurer unless and until the Commissioner certifies in a bulletin or order that the admitted private flood insurance market is adequate; and states that writing private flood insurance does not constitute participation in the property insurance market for purposes of determining participation in the state’s residual market program.

NCOIL CEO, Commissioner Tom Considine, stated, “2020 has been a record-breaking year in many distressing ways, hurricanes just one of them. With regard to natural disasters, we know all too well that not enough people are insured when a catastrophic event occurs. I am pleased with the hard work of the Special Committee and the outcome of the NCOIL Private Primary Residential Flood Insurance Model which is the result of much discussion and compromise between several legislators and interested parties.”