NFIP Reverses Mid-Term Cancellation Policy

On Monday, FEMA issued a bulletin stating that consumers cannot receive a refund for unearned premiums if they cancel a NFIP policy mid-term in favor of a private policy. The Big “I” is disappointed by this news but will continue to pursue legislative and regulatory solutions for addressing this issue.

In October, the NFIP instituted Cancellation Reason Code 26 (Code 26). Announced the previous spring, Code 26 was generally explained to the public as a measure that would allow for refunds on unearned premiums for mid-term cancellation of an NFIP policy if a consumer elected to purchase a policy from the private flood insurance market. However, when FEMA released the October flood insurance manual, it included confusing language which appeared to not permit such cancellations in most circumstances.

As such, the Big “I” and others requested that FEMA clarify its guidance to allow mid-term cancellations and initially received encouraging signs that they would be permitted. Unfortunately, the clarification issued on Monday will not allow mid-term cancellations moving forward.

For Big “I” members that may have cancellation requests pending or previously denied under Code 26, contact the Write-Your-Own company to determine the final status of the request. FEMA is currently reviewing pending Code 26 requests on a case-by-case basis to see if refunds can otherwise be granted.

Meanwhile, last week, Reps. Cathy Castor (D-Florida) and Blaine Luetkemeyer (R-Missouri) introduced H.R. 1666, which would clarify that if a consumer leaves the NFIP for the private market and conditions change causing the consumer to return to the NFIP, they can do so without rate penalty. The Big “I” strongly supports clarifying that private flood insurance can satisfy NFIP continuous coverage requirements and supports this legislation.

The Big “I” also sent a joint letter to FEMA this week requesting clarification on the continuous coverage policy.

Jennifer Webb is Big “I” federal government affairs senior counsel.