PIACT opposes flood disclosure, cites unnecessary burdens on insurance producers

PIACT voiced opposition to S.B.1245, a proposed bill that would require insurance producers and surplus-lines brokers to provide written notice about the availability of flood insurance at the time of application for personal risk insurance. While PIACT supports efforts to educate consumers about flood coverage, the association argues that this bill creates redundant regulations, increases administrative burdens, and fails to address the real issue—affordability.

What the bill proposes

S.B.1245 is part of a broader initiative to enhance climate resilience in Connecticut: it would require various stakeholders—homeowners, landlords, mortgage lenders and insurance producers—to provide increased disclosures regarding flood risks and insurance options.

Specifically, the bill would mandate that:

• Insurance producers and surplus-lines brokers must provide written notice to applicants for homeowners and tenants insurance about the availability of flood insurance and obtain a signed acknowledgment from the applicant.
• Insurance companies would need to include a bold, capitalized notice on homeowners and tenants insurance declarations pages stating that flood coverage is not included.
• Mortgage lenders would need to inform loan applicants, in writing, that standard homeowners policies do not cover flood damage, regardless of whether the property is in a designated flood zone.
• Sellers and landlords would need to provide detailed flood risk disclosures, including prior flood damage history, Federal Emergency Management Agency flood zone designations, and any previous disaster assistance received for flood damage.

While these provisions aim to increase flood risk awareness, PIACT argues that they would be unnecessary, duplicative and could impose unintended consequences on insurance producers and consumers.

Flood insurance awareness vs. affordability

Many independent insurance producers already discuss flood insurance with their clients—especially those in flood-prone areas. The real challenge is not a lack of awareness but the high cost of coverage.

Flood insurance is available through the National Flood Insurance Program and private insurers, but many property owners find the premiums prohibitively expensive. Instead of imposing additional paperwork on agents, PIACT urged lawmakers to focus on solutions that make flood insurance more affordable and accessible.

Unnecessary and duplicative requirements

Existing federal and state laws already require flood insurance disclosures. Mortgage lenders must inform homebuyers if their property is in a flood zone, and they must provide information on insurance options. Additionally, FEMA and the NFIP already promote flood insurance awareness through public outreach campaigns.

Adding another layer of disclosure requirements does not increase consumer protection—it only adds to the regulatory burden on independent agents, many of whom operate small businesses with limited resources.

Increased administrative burdens on producers

Under S.B.1245, producers would need to provide written disclosures and obtain signed acknowledgments from every applicant. This would create:

• More paperwork for agents already navigating heavy compliance requirements.
• Additional costs that could be passed down to consumers.
• Operational challenges for small, independent insurance agencies.

PIACT argues that these burdens would make it harder for producers to provide services to  their clients efficiently—ultimately limiting consumer access to quality insurance advice and options.

Potential liability risks for insurance producers

Beyond administrative concerns, PIACT warns that S.B.1245 could expose insurance producers to increased liability risks. If consumers later claim they were not informed properly—or misunderstands the flood insurance disclosure—producers could face legal action.

This potential for litigation might discourage agents from offering flood insurance altogether, reducing competition and consumer choice in the marketplace.

A more effective approach

Rather than imposing unnecessary regulations, PIACT suggests that lawmakers focus on improving flood resilience and affordability. The association encourages:

• Investing in flood mitigation efforts at the state and local level.
• Exploring public-private partnerships to reduce flood insurance costs.
• Providing financial incentives to encourage homeowners to purchase coverage.

While PIACT supports efforts to increase flood insurance awareness, the association opposes S.B.1245 due to its duplicative nature, administrative burdens and potential negative impact on insurance producers and consumers.

Instead of adding unnecessary regulations, Connecticut lawmakers should focus on practical solutions that make flood insurance more affordable and accessible.