[Federal Register Volume 70, Number 169 (Thursday, September 1, 2005)]
[Notices]
[Pages 52117-52119]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-17444]


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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

RIN 1660-ZA06


Flood Insurance Training and Education Requirements for Insurance 
Agents

AGENCY: Federal Emergency Management Agency (FEMA), Emergency 
Preparedness and Response Directorate, Department of Homeland Security.

ACTION: Notice.

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SUMMARY: FEMA is publishing minimum training and education 
requirements, as required by section 207 of the Flood Insurance Reform 
Act of 2004, for all insurance agents who sell Standard Flood Insurance 
Policies issued through the National Flood Insurance Program (NFIP).

FOR FURTHER INFORMATION CONTACT: Mr. Edward L. Connor, Federal 
Emergency Management Agency, Mitigation Division, 500 C Street, SW., 
Washington, DC 20472, (202) 646-3429 (phone), (202) 646-2849 
(facsimile), or [email protected] (e-mail).

SUPPLEMENTARY INFORMATION: On June 30, 2004 the President signed the 
Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of 2004 (Flood 
Insurance Reform Act of 2004), Pub. L. 108-264. Section 207 of the 
Flood Insurance Reform Act of 2004 states:

    The Director of the Federal Emergency Management Agency shall, 
in cooperation with the insurance industry, State insurance 
regulators, and other interested parties--
    (1) Establish minimum training and education requirements for 
all insurance agents who sell flood insurance policies, and
    (2) Not later than 6 months after the date of enactment of this 
Act, publish these requirements in the Federal Register, and inform 
insurance companies and agents of the requirements.

    This notice describes FEMA's implementation of section 207 of the 
Flood Insurance Reform Act of 2004. As required by the Act, FEMA has 
coordinated with the State insurance regulators, the insurance 
industry, and other interested parties. Input received from these 
organizations emphasizes the value of working through the State 
insurance departments to avoid establishing conflicting or burdensome 
training requirements upon insurance agents. While implementing the 
minimum training requirements required by section 207, FEMA has been 
mindful of the Senate Report language, (S. REP. NO. 108-262, at 4 & 9 
(2004)), which cautions:

    In some cases, states may already have requirements to ensure 
that agents are well-versed in the flood insurance program. Where 
possible, FEMA should work to make sure that agents are not burdened 
with inconsistent state and federal training and education 
requirements. In addition, where possible, FEMA should work to 
implement the training requirements through the states, which 
already have continuing education processes in place.

    Under 15 U.S.C. 1011 et seq., commonly referred to as the 
``McCarran-Ferguson Act'', section 6701, States have the authority to 
establish qualification standards by which insurance agents are 
licensed to do business and to determine the continuing education 
requirements for maintaining such licenses in the particular 
jurisdiction. However, the McCarran-Ferguson Act specifically excludes 
from State regulation an insurance program carried out by the Federal 
Government, including the NFIP, and FEMA lawfully may establish 
specific standards to sell flood insurance under the NFIP. Rather than 
establish separate, and, perhaps duplicative requirements, FEMA has 
chosen to work with States to ensure that NFIP requirements are 
implemented through established (existing) licensing schemes. For 
example, several States already include questions about flood insurance 
on their agent licensing examinations, and some also award continuing 
education credits for agents who complete flood insurance training. It 
is our intent to encourage States to implement minimum training in NFIP 
flood insurance as part of their general licensing standards and to 
assist

[[Page 52118]]

States in improving their training and testing of agents on flood 
insurance matters as appropriate.
    FEMA is committed to actively supporting the States in implementing 
their flood insurance training programs for insurance agents and will, 
in support of that commitment, provide: expertise regarding the content 
of a flood insurance training program that would enable insurance 
agents to have a basic understanding of the NFIP; access to NFIP 
training modules, including online modules; and, NFIP materials and 
other technical assistance as may be needed to address unique 
requirements. Further, as FEMA establishes policy or procedural changes 
or enhancements that should be reflected in State-approved flood 
insurance training programs, these will be provided by FEMA to the 
State insurance departments.
    FEMA will work with State insurance departments that do not already 
have established flood insurance training programs for insurance agents 
to implement the guidance provided by the National Conference of 
Insurance Legislators (NCOIL). The ``State Flood Disaster Mitigation 
and Relief Model Act'' adopted by the NCOIL Executive Committee on 
November 21, 2003, includes the following text that States will find 
useful when adopting their flood insurance requirements:

Part IV. Miscellaneous Provisions Regarding Participation

Sec. 1. Insurance Producer Qualification; Continuing Education

    The [State entity for regulating insurance] shall require:
    1. Pre-licensing requirement. The [State entity for regulating 
insurance] shall require all resident insurance producer applicants 
to demonstrate satisfactory knowledge and understanding of flood 
insurance and the National Flood Insurance Program, as determined by 
the [State entity for regulating insurance] in order to qualify for 
licensure.
    2. One-time continuing education requirement for existing 
licensees. The [State entity for regulating insurance] shall require 
resident insurance producers licensed on [the bill's effective date] 
to complete a continuing education course related to flood insurance 
and the National Flood Insurance Program before [a date certain at 
least two years from the bill's effective date]. The course shall be 
three hours in length and shall be approved by the [State entity for 
regulating insurance]. Completion of the course will provide the 
licensee with three hours of continuing education credit.

Incentives for Trained Agents

    FEMA offers various incentives to encourage insurance agents to 
pursue flood insurance training. The NFIP's Agent Co-op Program 
provides agents, Write Your Own (WYO) companies, and insurance 
associations with the advertising tools they need to produce local and 
regional advertising that supports the national NFIP campaign. 
Insurance agents who participate in the program are reimbursed a 
portion of their advertising budget when they use the program's pre-
approved ad templates. An additional 25 percent in co-op funds are 
offered to agents who complete a State-approved continuing education 
course on flood insurance within the past 12 months. Details are 
provided at http://www.FloodSmart.gov.
    Additionally, agents who sign up for the NFIP's Agent Leads 
Referral program receive free leads generated through the NFIP 
marketing efforts. Plans are being developed to enable agents who have 
completed flood insurance training to be given a special designation or 
priority in the distribution of leads.

Flood Insurance Course Content

    The following material outlines the standard content that States 
should include when establishing or updating their flood insurance 
training requirements. This outline reflects input gathered by FEMA 
from the following: State insurance regulators; insurance companies 
that sell flood insurance under the NFIP's WYO Program; the Independent 
Insurance Agents and Brokers of America; the National Association of 
Professional Insurance Agents; and the Coalition of Exclusive Agent 
Associations. This training course content, if effectively delivered, 
would enable insurance agents to gain a basic understanding of the 
NFIP, so that they could share this information with their customers. 
Additional training should be taken by insurance agents on a regular 
basis to gain understanding of more advanced flood insurance topics.

Basic Flood Insurance Course Outline

Section I--Introduction
     NFIP Background
     Community Participation
     Emergency Program Defined
     Regular Program Defined
     Community Rating System
     Eligible/Ineligible Buildings
     Coastal Barrier Resources System and Other Protected Areas
     Who Needs Flood Insurance?
    [cir] Mandatory Purchase of Flood Insurance in High Flood Risk 
Zones
    [cir] Recommended in Moderate and Low Flood Risk Zones
     Why Flood Insurance is Better than Disaster Assistance
Section II--Flood Maps and Zone Determinations
     Flood Hazard Boundary Map (FHBM)
     Flood Insurance Rate Map (FIRM)
    [cir] Pre-FIRM/Post-FIRM Defined
    [cir] Special Flood Hazard Area Defined
     Base Flood Elevation
     Zone Determination
Section III--Policies and Products Available
     Dwelling Policy--Types of Buildings Covered
     General Property Policy--Types of Buildings Covered
     Residential Condominium Building Association (RCBAP) 
Policy--Types of Buildings Covered
     Preferred Risk Policy--Types of Buildings Covered
     Definitions:
    [cir] Flood
    [cir] Basement/Enclosure
    [cir] Elevated Buildings
     Damages Not Covered
    [cir] Single Peril Policy
    [cir] Mudslides vs. Mudflow
     Property Covered
    [cir] Basements
    [cir] Appurtenant Structure
    [cir] Loss Avoidance Measures
    [cir] Debris Removal
    [cir] Improvements and Betterments
     Property Not Covered
    [cir] Decks
    [cir] Finished Items in Basements
    [cir] In Enclosures
    [cir] Additional Living Expenses
     Increased Cost of Compliance Coverage
Section IV--General Rules
     Statutory Coverage Limits
     Deductibles
    [cir] Standard Deductibles
    [cir] Applies Separately for Building and Contents
     Property Value Determination for Selecting Coverage Amount
     Loss Settlement
    [cir] Actual Cash Value (ACV)
    [cir] Replacement Cost Value (RCV)
    [cir] Co-insurance Penalty in RCBAP
     Reduction and Reformation of Coverage
     No Binders
     One Building per Policy--No Blanket Coverage
     Building and Contents Coverage Purchased Separately
     Waiting Period/Effective Date of Policy
     Policy Term
     Cancellations
Section V--Rating
     Types of Buildings
    [cir] Elevated Buildings

[[Page 52119]]

    [cir] Buildings with Basements
     When to Use an Elevation Certificate
     Grandfathering
Section VI--Claims Handling Process
     Helping Your Client to File a Claim
     Appeals Process
     Claims Handbook
Section VII--Requirements of the Flood Insurance Reform Act of 2004
     Point of Sale and Renewal Responsibilities
    [cir] Notification of Coverages Being Purchased
    [cir] Policy Exclusions that Apply
    [cir] Explanation Regarding How Losses Will be Adjusted (ACV vs. 
RCV)
    [cir] Number and Dollar Amount of Claims for Property
    [cir] Acknowledgement Forms
Section VIII--Agent Resources
     Write Your Own Company
     FEMA Web sites:
    [cir] http://www.fema.gov/nfip
    [cir] http://www.floodsmart.gov
    [cir] http://training.nfipstat.com
     Flood Insurance Manual

    Dated: August 25, 2005.
Michael D. Brown,
Under Secretary, Emergency Preparedness and Response, Department of 
Homeland Security.
[FR Doc. 05-17444 Filed 8-31-05; 8:45 am]
BILLING CODE 9110-11-P