Summary: In response to a congressional request, GAO reviewed the status of the Write Your Own (WYO) portion of the National Flood Insurance Program (NFIP), which the Federal Emergency Management Agency's Federal Insurance Administration (FIA) administers, specifically: (1) WYO status as of September 30, 1986; (2) the benefits the federal government received from the administrative expense allowance, which the insurance companies retained from WYO policy premiums; and (3) FIA management of the program and monitoring of WYO companies.
GAO found that: (1) as of September 1986, there were over 1 million WYO policies, about half of all NFIP policies; (2) the administrative expense allowance for WYO companies will decrease by 2.3 percent between fiscal year (FY) 1986 and FY 1988; (3) FIA does not require the companies to keep records of their actual costs to implement the program, but most indicated that they incurred administrative expenses for various activities, including marketing; (4) FIA is still in the process of implementing statistical reporting requirements, on-site reviews, and audits under the WYO financial control plan to ensure that companies sell and service policies in accordance with program requirements; (5) to date, most WYO companies have satisfactorily implemented the program; and (6) FIA is developing reports to facilitate its evaluation of individual companies' performance and criteria for the termination of companies for unsatisfactory performance. GAO discussed the program with WYO companies and found that they: (1) did not want to compete with the FIA direct sales program, which FIA planned to retain through September 1993; (2) felt that FIA did not provide enough advance notice on insurance premium changes; and (3) felt that they would need to increase insurance rates in order to meet the program's long-range goal of having them share claims costs.
