A proposed rule by the Federal Emergency Management Agency to update the Standard Flood Insurance Policy form is generally more user-friendly and may improve policyholder comprehension, but there remain issues that must be addressed, the American Bankers Association and Mortgage Bankers Association said today in a joint letter to the agency.
The SFIP defines the coverage, limitations and exclusions for National Flood Insurance Program policies and includes terms and conditions that are unique to the program. FEMA last updated the SFIP form in 2000, but in March, the agency proposed to make several changes. In their letter, ABA and MBA said some of the proposed changes could inadvertently increase confusion for policyholders. The associations also said that some aspects of the new form are unclear, which will present challenges for lenders and servicers charged with complying with the Flood Disaster Protection Act. For example, FEMA has proposed new definitions for terms such as “building” and “basement” that could be difficult to decipher for policyholders.
“To guarantee that these matters are comprehensively addressed before the new form and its endorsements are adopted and implemented, it is crucial for FEMA to engage in a collaborative process with the prudential regulators,” the associations said. “This partnership will ensure that the finalized policy accurately reflects the needs and addresses the challenges faced by all stakeholders.”
