State Farm estimates that many of its estimated 117,000 captive agents will be affected by the proposed amendment.

The amendment was prompted by State Farm's June 2010 decision to withdraw as a WYO company. The policies were transferred to NFIP Direct, but State Farm's captive agents remained responsible for servicing them and finding claims adjusters to deal with the claims process.

Ben McKay, senior vice president of federal government relations for the Property Casualty Insurers Association of America, says the amendment is necessary in order to increase private participation in the NFIP, take advantage of the claims-handling expertise of the private insurance sector and reduce the administrative burden on the flood program."

Because State Farm is pulling out of the WYO program, the federal government will soon be the largest policy writer and servicing entity for flood insurance, "in effect competing with private WYO companies," McKay adds.

"We support the current public-private partnership for managing flood risk in the U.S. and urge Congress to adopt measures that will encourage more policies to be administered by the private market and preserve the NFIP Direct program's original function that handles only complex risks and repetitive losses," McKay says.

Charles Symington, senior vice president of government affairs for the Independent Insurance Agents and Brokers of America (IIABA), says, "The IIABA strongly supports ensuring that the NFIP remains a private-public partnership and feels that, to the fullest extent possible, flood policies should be written through agents and their WYO companies."

"We certainly support the goals of the 'depopulation amendment' and look forward to working with the House Financial Services Committee on making this important effort work for agents, the WYO's, the NFIP and, most importantly, for consumers."

Phil Supple, State Farm spokesman, disagrees. "What this amendment would do is eliminate consumer choice for those longtime policyholders served by State Farm agents. Whether it is a Write Your Own policy or a State Farm agent participating in NFIP Direct, the policy coverage and the underwriting of losses remains with the federal government."

State Farm withdrew from the WYO program because since 2002, there have been 11 last-minute reauthorizations of the NFIP, and on four occasions the program was allowed to lapse for extended periods of time.

"These 'stop/start' situations require a large company like State Farm to dedicate significant resources to address challenges and coordinate numerous communications with customers, employees and its more than 17,000 agents," State Farm says.