Insurance companies hoping to gain access to over 800,000 free-agent flood insurance policies are fighting on Capitol Hill this week. Since State Farm Insurance dropped the policies last year to lighten its burden, other major insurers hope to gain control of them to increase their profits.
Major Insurers Want Control over Policies
A number of major insurance companies, including Fidelity National, Allstate, Travelers and The Hartford are hoping to gain access to flood insurance policies State Farm dropped last year, which represent approximately 15 percent of the $3.3-billion flood insurance market.
While State Farm did not insure property against floods or storm surges–this is handled by the National Flood Insurance Program (NFIP)–the program relies on private insurers to administer the policies and State Farm was NFIP’s largest administrator.
State Farm dropped its policies in the middle of 2010 as it, among other insurers, grew frustrated with the shaky NFIP and its continual expirations, which left many policyholders without coverage for weeks at a time. Now that nearly one million policies are without a home, insurers want to quickly grab them up.
State Farm Shields Insurers from Takeover
One roadblock companies are facing is the arrangement set up by State Farm to shield the policies from being taken over by other insurers. This leaves Congress with the burden of deciding what to do with them.
Lawmakers have made other progress with the NFIP, though. Recently, a bill was approved in the House of Representatives that would extend the program to 2016. There is still work to do in reforming the program, however, and the fight over policies adds to the ongoing issue.
Some may wonder why the policies are so pertinent for insurers who don’t stand to gain much from the flood insurance business alone. Their hope is that by taking on the flood policies, their customers will be willing to bundle in their home, auto and other insurance policies, which could mean huge profits for the companies.
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