Slabbed takes at peek at NFIP direct and explains the timing of State Farm's departure from the Flood Program

This J&A approval request does not diminish the fact; that FEMA Acquisitions allowed this contract to be performed without adequate oversight from our acquisition staff whether inherited or created. As an organization we are taking full ownership of our responsibility to manage the contract properly and are taking the necessary steps to correct our process.

Welcome to Government, Inc., NFIP style, as FEMA issued a justification and approval to extend the contract with NFIP’s Direct Servicing Agent, Computer Science Corporation on April 30, 2010. We’ve profiled the problems in the National Flood Insurance Program since early 2008 and believe me when I say the above disclosure takes FEMA light years away from the federal agency and program long known for its coziness with the WYO insurers it was charged to regulate during the George Bush years.

FEMA has a problem though as we continue quoting from the justification and approval:

The NFIP-Direct is the only option for independent Agents (as opposed to “captive agents” who write through their companies such as State Farm, Nationwide, Traveler’s, etc.). The Direct via Independent Agents have historically written about 10% of the total book of business. The total amount of revenue generated from the sale flood insurance policies last year was an astounding $111,868,216.00. The total amount funds generated have a direct stimulus on the Government’s economy through these sales. This is a critical service the Government provided to the citizens of this nation and the services could have a severe financial hardship to the Government if the services are not extended.

It is indeed the only option but having one qualified vender to perform the tasks is not a good situation though it is certainly reflective of what happens when an entire industry (insurance) is given an anti trust exemption and not effectively regulated. Business is fixing to pick up too with news State Farm is leaving the WYO program, which should kick  that book of business percentage up to around 40%.

Is the timing of State Farm’s announcement they are leaving the WYO program a coincidence? I don’t think so, especially since the main impact is to send even more policyholders to NFIP-Direct and CSC.

The entire J&A is excellent reading. I’ve embedded it courtesy of Scribd:

[scribd id=32707604 key=key-7axy9iqk32tpclbrsq9 mode=list]


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