A bill that would delay steep flood insurance premium hikes won approval from the U.S. Senate and now faces an uncertain fate in the U.S. House of Representatives.
The Homeowner Flood Insurance Affordability Act of 2014 would postpone up to four years premium hikes that were supposed to begin phasing in next year. It would also let homeowners who pay below-risk rates to pass those on when selling their homes. Critics say the bill would undo important reforms needed to stabilize the National Flood Insurance Program, now $24 billion in the red.
The flood insurance rate increases were among measures in the Biggert-Waters Flood Insurance Reform Act. Congress passed that law two years ago after years of wrangling over how to make the flood insurance program financially sound. Among other things, the law called for phasing in premium hikes in flood-prone areas to reflect the actual risk those properties face. Now some residents pay below-risk rates, essentially receiving coverage subsidized by the government and policyholders in less-risky areas.
The Biggert-Waters reform law was hailed as a major step, but a flood of complaints poured in when residents in coastal areas saw how much they'd be paying. Some people said they would lose their homes because they would not be able to afford the coverage.
Approved by a 2-1 margin Jan. 30, the Senate bill will move to the Republican-controlled House of Representatives.
The Independent Insurance Agents & Brokers of America "The Big I" praised the bill, saying it would help soften the sticker shock some consumers were facing. It also favored provisions that will streamline agent and broker licensing.
But the Property Casualty Insurers Association of America (PCI) and the National Association of Mutual Insurance Companies opposed the bill, along with the Consumer Federation of America (CFA).
"Most people would assume that a consumer group such as CFA would seek lower insurance rates for consumers. And, indeed, we do try to achieve that, consistent with reasonable profits for insurers," CFA Director of Insurance J. Robert Hunter said in a written statement. "But we do not support lowering rates for an insurance program below sound prices, unless that is done by a separate program of subsidies, clearly identified and funded by taxpayers."