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PIA Urges FEMA to Drop Proposed Change to National Flood Insurance Program

WASHINGTON, November 14, 2003 - The National Association of Professional Insurance Agents (PIA) is urging that the federal government drop a proposed change...
November 14, 2003

WASHINGTON, November 14, 2003 - The National Association of Professional Insurance Agents (PIA) is urging that the federal government drop a proposed change to the National Flood Insurance Program (NFIP) that will have the unintended consequence of making flood insurance more legally complicated.

PIA has filed formal comments with the Federal Emergency Management Agency (FEMA) objecting to one specific aspect of the proposed rule changes to relating to NFIP. The section PIA objects to converts all insurance producers, either contracted or employed by Write-Your-Own (WYO) insurers, into "agents acting for the insured."

"Far from being a minor change as FEMA contends, this is a sea change that completely recasts the entire program," said PIA Senior Vice President Patricia A. Borowski. "It would transform the Write Your Own program into a confused mess to the detriment of consumers and the agents they turn to for their flood insurance needs."

PIA argues the change has four material impacts:

  1. Through FEMA actions, the federal government is inserting itself into what were heretofore private matters of insurance business employment, contract and law, and imposing a specific inflexible per se status on insurance producers, not allowing for situational variations.
  2. It effectively changes all WYO contracted or employed insurance producers into independent insurance brokers.
  3. It continues to go even further by severing the usual and customary understandings regarding WYO contracted or employed producers, making them absolutely free-standing of their WYOs.
  4. The sum effect is a material, complete recasting of the WYO program into a confused mess.

Borowski said PIA had understood that FEMA and WYO insurers wanted a more efficient access to resolve flood-related litigations in federal court. PIA supported this notion. But the proposed changes go far beyond what is needed to affect that limited change. Instead, this particular aspect is harmful and unfair to all insurance producers in the WYO program, especially independent insurance agents and brokers.

"We agree that our WYO insurers should not be viewed as 'deep pockets' for any cleverly conceived litigation scheme to secure recovery when the right coverage was never secured by the insured to begin with," Borowski said. "But PIA won't stand by and see that burden and exposure exclusively shifted to our members in the WYO program, leaving them with no legal remedies to execute when there are culpable mistakes made by others in the NFIP program, such as a WYO, their contracted processing vendor, or FEMA personnel. Whether intended or not, that is what this aspect of the rule change package would do."

"PIA's position is simple - dump that aspect of the rule changes package, and let private business and contract freedoms continue to prevail," Borowski said.

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses.