The Florida Office of Insurance Regulation has responded to state Sen. Jeff Brandes’ request to study the methods used to determine National Flood Insurance Program policy rates.
The office agrees that with the limited information available to regulators, the rates may be “unfairly discriminatory.”
According to a letter from OIR commissioner Kevin McCarty, his NFIP experience suggests the flood loss ratio from 1978 until 2012 was just 28.3 percent.
“This is not an alarming loss ratio, and does not seem to suggest that dramatic increases are needed for Florida risks,” McCarty wrote. “We share your concern about the need for transparency in the ratemaking process utilized by the Federal Emergency Management Agency for the National Flood Insurance Program and we have publicly expressed those concerns.”
McCarty said his office will ask NFIP and the Federal Emergency Management Agency for the “actuarial study including all data and models used.”
McCarty explained there are 30 zones each in two separate categories, one more coastal than the other. NFIP averages those together to charge one rate across the country.
“The averaging together of zones with different costs and charging one rate would be considered unfairly discriminatory from an actuarial perspective, which would not pass scrutiny under Florida law.”
OIR wants to focus on future flood projections currently under development. The Florida Hurricane Loss Projection Methodology Commission including an actuary from the OIR is already engaged in developing better “principles, standards, models and output ranges for personal lines residential flood loss.”
The commission expects to adopt a plan by July, 2017, and is asking for Brandes’ continued support in order to “facilitate the release of NFIP claims and ratemaking data.”
Brandes sent a letter to McCarty earlier this month asking for the agency’s support in obtaining flood insurance data regarding the NFIP. Brandes has long been a proponent of providing more affordable flood insurance options for Floridians, but became particularly alarmed after learning there were 100,000 fewer flood insurance policies in effect this June compared to last May.
As a result of a law passed at the federal level known as the Biggert-Waters Act, homeowners face as much as 25 percent rate increases each year for non-primary residences and 18 percent a year for those who live in their homes year round.
Brandes hopes to expand private market options for homeowners to more competitively shop for affordable policies.
“The success of this marketplace depends on the availability to access their loss history data,” Brandes said in an interview earlier this week, referring to the private marketplace.
He said he will continue to pressure NFIP and FEMA for data in order to bring more transparency to the insurance industry in Florida.