The 2016 Annual Report of the Office of Flood Insurance Advocate
The Office of the Flood Insurance Advocate (OFIA) advocates for the fair treatment of policyholders and property owners, or customers, by providing education and guidance on all aspects of the National Flood Insurance Program (NFIP), identifying trends affecting the public, and making recommendations for program improvements to Federal Insurance and Mitigation Administration (FIMA) leadership. This report highlights six areas of customer frustration related to the NFIP, specifically in relation to flood insurance, flood hazard mapping, Hazard Mitigation Assistance (HMA) grants, and floodplain management.
The issues emerged to the OFIA while assisting customers with their questions and concerns, a primary activity for the OFIA stemming from its mandate outlined in Section 24 of the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA). In this report the OFIA aims to advocate to the FIMA program offices with recommendations to address these issues that
will have the greatest positive impact for a larger population of NFIP customers.
The six issues presented in this report are as follows:
• Erroneous Severe Repetitive Loss (SRL) Properties Designation: A subset of policyholders have buildings that are incorrectly identified as being an SRL property, even after the property has been mitigated. The complicated appeal process makes it challenging for policyholders to correct the designation, resulting in some property owners facing a 25% increase to their annual premiums.
• Gaps in Flood Insurance Agent Education: Flood insurance education for insurance agents who sell and service NFIP flood insurance needs to be more robust. In addition to the twice yearly standard program changes, the NFIP is undergoing significant change due to legislative reform. The one-time, three-hour flood insurance training requirement is not sufficient to ensure customers are being sold an accurately rated flood insurance policies
and agents are communicating correct information about the NFIP.
• The Need for Consistency Across Regions in Public Mapping Outreach:
Policyholders and property owners continue to face significant challenges in obtaining consistent and understandable mapping information and outreach-related information across FEMA’s 10 Regions. Policyholders and property owners need answers to their questions regarding the effects map revisions have on flood insurance, such as how they will impact premiums, the requirement to purchase a policy, and associated refund procedures.
• Difficulties Accessing Increased Cost of Compliance (ICC) Coverage:
Customers continue to be frustrated with several issues related to the ICC portion of the claim process. One issue is that insurers do not advance ICC payments to policyholders in order to pay contractors to begin mitigation projects. Policyholders are also confused when they are denied ICC, because they have received the maximum amount of building coverage available under the NFIP, but have been paying premium for ICC coverage. It also appears there is not enough readily accessible ICC guidance to assist policyholders with successfully navigating the ICC claim process. Finally, there continues to be a concern that the maximum amount of ICC coverage available ($30,000) under the NFIP is insufficient to complete most mitigation projects.
• Difficulties with Multiple and Conflicting Flood Zone Determinations: Flood zone determinations by multiple entities are a major issue affecting policyholders and property owners. Confusion occurs when property owners are told by their lender they must pur- chase flood insurance because their building is located within a high risk flood area.
However, their insurance agent determines their building is located in a moderate-to-low risk flood area and the requirement to purchase flood insurance does not apply. This is confusing when both sources use the same flood map to make the flood zone determi- nation, leaving the property owner
frustrated. Flood zone discrepancies can also cause premium rating disputes that may require policyholders to pay more for flood insurance. There is no clear path for these different sources to work together to solve the discrepancy.
• Inability to Obtain a Refund of the HFIAA Surcharge When Canceling an NFIP Policy: Policyholders are voicing concerns about the inability to obtain a refund of the surcharge from the NFIP when policies are canceled and a full or pro rata portion of the premium is returned.
The OFIA will continue to work on the NFIP issues and OFIA recommendations by engaging with the FIMA program offices to discuss, understand, and identify opportunities that exist to address these issues for policyholders and property owners. The issues in this report arepresented in three parts: the key issue affecting customers, the background of the issue, and the OFIA’s recommendations for program’s consideration. FIMA program office’s responses
are included as received.