Write-Your-Own insurance companies will be helping the Federal Emergency Management Agency provide refunds to National Flood Insurance Program customers whose rate hikes were reversed or reduced under March legislation rolling back the 2012 Biggert-Waters Act.
The Biggerts-Waters Act had imposed actuarial rates on all NFIP premiums.
WYO companies will be doing so even though the March legislation mandated that FEMA deal directly with the issue, according to Don Griffin, vice president of personal lines at the Property Casualty Insurers Association of America and chairman of the WYO Coalition, which represents insurers who help administer the NFIP. More than half of WYO companies are PCI members.
"FEMA was supposed to deal with this under the bill, but, practically, the WYO companies will be issuing the refunds once FEMA gives them the information," Griffin says.
"Companies have to know what they will be refunding, using the rates and the process FEMA wants used to do this, but WYO companies are cooperating," Griffin says.
He notes there are "a lot of problems and details with this issue," adding, "WYOs will be working with FEMA closely, as mandated by the legislation."
Griffin's comments came in response to a memo to WYO companies issued May 29 by David L. Miller, FEMA associate administrator. The memo was needed to ensure WYO companies make the number of changes mandated by the March legislation.
Griffin says WYO companies have had to revise their software three times to deal with the revisions to the 2012 law, including:
- Reinstating subsidies provided to NFIP customers prior to Biggert-Waters.
- Putting the revised rates in place according to the memo
- Processing the refunds.
Griffin says the bills for the rates that will be effective Oct. 1and will start to go out Aug. 1.
The March legislation reduced the cap on rate increases from the prior 20% to 5%-to-15% on a "class" basis. However, no individual's premiums can rise more than 18% annually under the new law.
Griffin says the March law did not change the 25% increase imposed by the 2012 law on second homes, businesses, severe repetitive properties or on properties where cumulative losses have exceeded the market value of the home.
He says the May 29 memo gives WYO companies "about six weeks to get these things tested so they work right."
The May 29 memo does not address refunds. Griffin says another bulletin to be issued by July 1 will do so. "The goal is to have repayments in the hands of customers by the end of the year," says Griffin.
He says WYO insurers will not be reimbursed for making the refunds to customers, but they will be allowed to keep some of the fees they have already been paid, fees based on the higher rates.
However, Griffin notes, "These additional fees will not mitigate the substantial costs WYO companies will be absorbing by having to rewrite the software so soon after rewriting the software to comply with the original 2012 bill."
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