Office of the Flood Insurance Advocate Releases Second Annual Report

Mar 3, 2017 | News & Views, What's New

Office of the Flood Insurance Advocate Releases Second Annual Report
The Office of the Flood Insurance
Advocate advocates for the fair treatment of policyholders and property owners
by providing education and guidance on all aspects of the National Flood
Insurance Program, identifying trends affecting the public, and making
recommendations for program improvements to Federal Insurance and Mitigation
Administration leadership.

In its second year of
operations, the OFIA has handled approximately 400 inquiries, which is 30% more
than last year’s inquiry traffic. Consistent with what was reported in 2015,
approximately 77% of inquiries were related to flood insurance, 15% related to
flood hazard mapping, and the remaining 8% shared between floodplain management
and Hazard Mitigation Assistance grants. The majority of these cases are highly
complex and require a high degree of collaboration across FIMA.

The OFIA’s second annual report highlights six areas of customer frustration
related to the NFIP, specifically in relation to flood insurance, flood hazard
mapping, Hazard Mitigation Assistance grants and floodplain management.

The six issues presented in the report are as follows:

Erroneous Severe
Repetitive Loss 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 policy and agents are communicating
correct NFIP information.
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. Customers 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
Accessing Increased Cost of Compliance 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 ICC is denied (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 purchase 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 determination, 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
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 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.