Earlier this week, the Big “I” and other stakeholders sent a letter to FEMA asking for clarification on when consumers can receive a refund for unearned premiums if they cancel an NFIP policy mid-term in favor of a private policy.
In March 2018, FEMA announced Cancellation Reason Code 26 (Code 26)—the implementation of which was supposed to allow for refunds on unearned premiums for the mid-term cancellation of NFIP policies if a consumer elects to purchase a policy from the private market. Since then, however, there has been uncertainty over how to properly apply this code to cancel an NFIP policy, because the October flood insurance manual included confusing language that stifles the intent of Code 26.
One possible interpretation of the October manual language is that if a policyholder has an NFIP policy in force, then buys a private flood policy intending to cancel the NFIP policy, that intentional act means it cannot be cancelled. Under this interpretation, consumers can only cancel if they obtain a private policy during an accidental renewal of an NFIP policy.
The Big “I” is requesting clarification to ensure that unearned premium refunds for a mid-term cancellation in favor of a private policy are permitted under Code 26 as FEMA intended.
Allowing for refunds on unearned premiums has broad support among NFIP stakeholders, would be beneficial to consumers, and would be consistent with ongoing efforts by FEMA to ensure that more Americans maintain insurance for the peril of flood.
In addition to seeking clarity on how Code 26 should be applied, the Big “I” also asked FEMA to consider options for ensuring that mid-term cancellation refunds are available consistently to consumers who purchase private flood insurance.
Jennifer Webb is Big “I” federal government affairs senior counsel.