Policy Issuance 4-95
September 12, 1995
Subject: NFIP Premium Refund Rules
Background: Due to the seasonal nature of flooding, the conditions for which the NFIP permits premium refunds are very restrictive. This prevents the purchase of a short-term policy to provide coverage during the period in which the insured property at risk has the greatest chance of loss.
The Mitigation Division has been evaluating the NFIP's premium refund procedures for cancellations and endorsements to determine the feasibility of expanding the valid reasons and/or the time the refund covers. During this period, Mitigation Division has had a special appeal process under which exceptions were allowed as to the reason for refunds and the period of time covered by the refund.
Based on Mitigation Division's evaluation of this experience, this Policy Issuance clarifies the misrating refund rule and sets forth the situations where NFIP multiple year refunds are authorized. The refund changes made by this Policy Issuance are effective November 1, 1995, and on that date the special appeal process is ended.
Policy Statement:
- Misratings. As stated on page END 1 of the Flood Insurance Manual an endorsement may be issued and premium returned as a result of a zone revision. This is to clarify that this includes a base flood elevation revision as well. It also includes an error in the building description (number of floors, whether basement or not, etc.).
Not included in this refund procedure is the failure to:
- Use the map grandfather rule,
- Use Post-FIRM rating for a Pre-FIRM structure,
- Use the V-zone risk factor rating form, or
- make a timely revision of alternative rates (rates used for Pre-FIRM rated risks where the zone is unknown).
- Prior Year Refunds. Premium refunds are permitted for the current and one prior year for all valid reasons, including the misrating clarification listed above. There are two exceptions under which refunds are allowed for more than the current and 1 prior year. These two exceptions are:
- Risk Not Eligible for Coverage (Reason 6 in the Cancellation/Nullification Section of the Flood Insurance Manual). A return of premium shall be made back to the inception of the policy, subject to the 6-year statute of limitations.
- Duplicate NFIP Policies (Reason 4 in the Cancellation/Nullification Section of the Flood Insurance Manual). A refund of premium shall be made for the policy not being kept in effect back to the date duplicate coverage began, subject to the 6-year statute of limitations.
The insured must have maintained continuous NFIP coverage to be eligible for any prior year premium refund. All existing refund rules concerning the Federal policy fee, expense constant, and producer commission remain in effect.
The current NFIP insurer (WYO Company or Direct Business) will be responsible for returning the premium for the current and 1 prior policy year, provided that it was the insurer for that period. If another NFIP insurer was the insurer for the prior policy year, it will be responsible for returning the premium for that year. The NFIP Bureau and Statistical Agent (the Bureau) will refund the premiums for the additional prior years beyond the current and 1 prior policy year, except the NFIP insurer will refund up to 3 years of a current 3-year policy if a refund is allowed for that period under the above prior year refund rules.
The Bureau will receive from the NFIP insurer or the agent all documentation necessary to make a refund for more than two years. At a minimum, this documentation will consist of the following:
- a cancellation request for each year and the premium refund calculation for each year,
- the declarations pages or renewal bills for each policy term and evidence of premium payments,
- upon request, photographs to verify ineligible risks.
The NFIP insurer or the agent will forward the requests for refunds for more than 2 years directly to the Bureau at the following address:
NFIP Bureau and Statistical Agent
7700 Hubble Dr.
Lanham, MD 20706
Requests for refunds for more than 2 years not authorized by this Policy Issuance will be returned to the sender by the Bureau.
Last Modified: Wednesday, 24-May-2006 12:13:27 EDT