Property and Casualty Insurance Practice Exam

What is one key benefit of the Write Your Own (WYO) program for private insurers?

1. Complete control over policy creation

2. Federal financial backing while servicing policies

3. Insurance policy exclusivity

4. Higher premiums for clients

The correct answer is: Federal financial backing while servicing policies

The Write Your Own (WYO) program allows private insurers to issue their own flood insurance policies under the National Flood Insurance Program (NFIP). One key benefit of this program is the federal financial backing that insurers receive while servicing these policies. This backing mitigates the financial risk for private insurers, as it provides a level of security and reassurance that they will not suffer significant losses in the event of large-scale flooding. This financial support is essential, especially since flood events can lead to high claim amounts that would strain a private insurer’s resources. The combination of being able to manage the business side of policies while having the safety net of federal assistance makes the WYO program particularly attractive to private insurers. In contrast, the other options do not reflect the primary advantages of the WYO program. While some insurers may have a good degree of control over policy language, it is not absolute due to federal regulations. The program does not grant exclusivity on policies, as many different insurers can participate. Lastly, the structure of the WYO program does not inherently lead to higher premiums for clients; instead, it aims to provide flood insurance to a broad audience at reasonable rates.