Policy Issuance 1-99

Subject: Renewals Ineligible for Preferred Risk Policies

Background: On May 1,1998, the National Flood Insurance Program (NFIP) changed the map "grandfather" rules and flood loss history rules applicable to the renewal of Preferred Risk Policies (PRP). As a result of these changes, many policyholders were switched from PRP policies to standard rated X zone policies on renewal.

It has come to our attention that a number of these policyholders were automatically switched from one policy to another without the opportunity of discussing the change and their coverage options with their insurance agents. Consequently, a number of policyholders have been attempting to have their policies endorsed to reduce or delete the coverage for contents. While we encourage all policyholders to carry contents coverage and have rules designed to restrict the reduction or elimination of coverage mid-term, we recognize the policyholders' right to decide the amount and type of coverage to carry at each renewal. It appears that a number of policyholders were not given an opportunity to exercise this right. This Policy Issuance is intended not only to allow policyholders to correct their existing policies, but also to allow insurance companies time to modify their procedures so that this does not happen in the future.

Policy Decision: In order to afford former PRP policyholders with an opportunity to decide how much contents coverage they want to carry on their standard rated X zone policies, the Mitigation Division is authorizing insurers to endorse these policies to reduce or delete the contents coverage under the following conditions.

  1. The policy must be endorsed back to its renewal date.
  2. The policy's inception date must be from May 1, 1998 through September 30, 1999.
  3. Policies with paid or pending contents claims cannot qualify under this procedure.

Last Modified: Thursday, 25-May-2006 15:26:47 EDT