NATIONAL FLOOD INSURANCE PROGRAM THE WRITE YOUR OWN PROGRAM FINANCIAL CONTROL PLAN REQUIREMENTS AND PROCEDURES (FCPRP) Original PrintingSecond PrintingThird PrintingFourth PrintingFifth Printing February 21, 1984 (Provisional) June 1, 1984 October 1, 1984 October 1, 1988 December 1, 1999 TABLE OF CONTENTS PAGE A PLAN TO MAINTAIN FINANCIAL CONTROL FOR BUSINESS WRITTEN UNDER THE WRITE YOUR OWN PROGRAM -OVERVIEW .....................................................1 PART 1 - FINANCIAL AUDITS, AUDITS FOR CAUSE, AND STATE INSURANCE DEPARTMENT AUDITS ...............................................................................1-1 A. BIENNIAL FINANCIAL AUDIT ......................................................................1-1 B. BIENNIAL UNDERWRITING AUDIT ............................................................1-2 C. BIENNIAL CLAIMS AUDIT ...........................................................................1-4 D. AUDITS FOR CAUSE...................................................................................1-5 1. Underwriting ..........................................................................................1-5 2. Claims ...................................................................................................1-6 3. Financial Reporting/Accounting.............................................................1-7 E. STATE INSURANCE DEPARTMENT AUDITS ............................................1-7 PART 2 -TRANSACTION RECORD REPORTING AND PROCESSING PLAN RECONCILIATION PROCEDURES .............................................................2-1 A. RECONCILIATION OBJECTIVES ................................................................2-1 B. FINANCIAL CONTROL.................................................................................2-1 C. QUALITY REVIEW OF SUBMITTED DATA.................................................2-2 D. POLICY RATING ..........................................................................................2-2 E. TIMELINESS OF REPORTING ....................................................................2-3 F. MONTHLY REPORTS ..................................................................................2-3 G. DATA SUBMISSION MONITORING PLAN ..................................................2-4 H. FRONT-END BALANCING PROCEDURE ...................................................2-5 WYO Financial Control Plan Requirements and Procedures Fifth Printing Table of Contents i Revised: 12/1/99 TABLE OF CONTENTS (Continued) PAGE I. REPORTING OF COMPANY RATING TO THE STANDARDS COMMITTEE AND THE ADMINISTRATOR.................................................2-5 PART 3 -CLAIMS REINSPECTION PROGRAM.........................................................3-1 A. OBJECTIVES................................................................................................3-1 B. MAJOR ELEMENTS .....................................................................................3-1 C. SAMPLING PROCEDURES .........................................................................3-2 PART 4 -REPORT CERTIFICATIONS AND SIGNATURE AUTHORIZATIONS.........4-1 A. REPORT CERTIFICATIONS ........................................................................4-1 1. Certification Statement for Monthly Financial and Statistical Reconciliation Reports .........................................................................4-1 2. Certification Statement for Monthly Statistical Transaction Report ......4-1 B. SIGNATURE AUTHORIZATIONS................................................................4-1 PART 5 -TRANSACTION RECORD REPORTING AND PROCESSING PLAN .........5-1 PART 6 - WRITE YOUR OWN (WYO) ACCOUNTING PROCEDURES MANUAL......6-1 PART 7 - OPERATION REVIEW PROCEDURES .......................................................7-1 A. UNDERWRITING/POLICY ADMINISTRATION OPERATION REVIEW OUTLINE AND PROCEDURES....................................................7-1 B. CLAIMS OPERATION REVIEW OBJECTIVES, OUTLINE, AND PROCEDURES............................................................................................7-9 C. MARKETING OPERATION REVIEW OBJECTIVES, OUTLINE, AND PROCEDURES..........................................................................................7-24 D. CUSTOMER SERVICES OPERATION REVIEW OBJECTIVES, OUTLINE, AND PROCEDURES ................................................................7-26 E. LITIGATION OPERATION REVIEW OBJECTIVES, OUTLINE, AND PROCEDURES..........................................................................................7-28 WYO Financial Control Plan Requirements and Procedures Fifth Printing Table of Contents ii Revised: 12/1/99 LIST OF EXHIBITS EXHIBIT PAGE 2-1 WYO TRRP Tape Specifications Transmittal Document ...............2-6 2-2 Reconciliation Statements..............................................................2-7 3-1 Binomial Table ...............................................................................3-3 3-2 Reinspection Report.......................................................................3-4 4-1 Certification Statement for Monthly Financial and Statistical Reconciliation Reports ...............4-2 4-2 Certification Statement for Monthly Statistical Transaction Report...........................................4-3 4-3 Signature Authorization for Monthly Financial and Statistical Reconciliation Reports ...............4-4 4-4 Signature Authorization for Monthly Statistical Transaction Report...........................................4-5 7-1 WYO Company Summary Report ..................................................7-4 7-2 Administrative Review Report ........................................................7-5 7-3 Specific Risk Review Checklist.......................................................7-6 7-4 Underwriting Review Summary ......................................................7-8 7-5 Claim Department Responsibilities, Authorities, and Composition .......................................................7-13 7-6 Claim Review Checklist................................................................7-14 7-7 Analysis of Claim Volumes and Payments...................................7-19 7-8a Analysis of Claims by Size of Claim .............................................7-20 7-8b Analysis of Loss Reserves ...........................................................7-20 7-9 Claim Review Summary Worksheet.............................................7-21 7-10 Suggested Letter Where Photocopy of Claim Payment Draft Is Available.............................................7-22 7-11 Suggested Letter Where Photocopy of Claim Payment Draft Is Not Available ......................................7-23 7-12 WYO Customer Services Evaluation Worksheet .........................7-27 WYO Financial Control Plan Requirements and Procedures Fifth Printing Table of Contents iii Revised: 12/1/99 NATIONAL FLOOD INSURANCE PROGRAM 44 CFR PART 62, APPENDIX B A PLAN TO MAINTAIN FINANCIAL CONTROL FOR BUSINESS WRITTEN UNDER THE WRITE YOUR OWN PROGRAM OVERVIEW A. In general, under the Write Your Own (WYO) Program, we (the Federal Insurance Administration (FIA), Federal Emergency Management Agency (FEMA)) may enter into an arrangement with individual private sector insurance companies licensed to engage in the business of property insurance. The arrangement allows these companies—using their customary business practices—to offer flood insurance coverage to eligible property owners. To assist companies in marketing flood insurance coverage, the Federal Government will be a guarantor of flood insurance coverage for WYO policies issued under the WYO Arrangement. To account for and ensure appropriate spending of any taxpayer funds, the WYO companies and we will implement this Financial Control Plan (Plan). Only the FIA Administrator (Administrator) may approve any departures from the requirements of this Plan. B. FINANCIAL CONTROL PLAN 1. The WYO Companies are subject to audit, examination, and regulatory controls of the various States. Additionally, the operating department of an insurance company is customarily subject to examinations and audits performed by the company’s internal audit or quality control departments, or both, and independent Certified Public Accountant (CPA) firms. This Plan will use to the extent possible the findings of these examinations and audits as they pertain to business written under the WYO Program. 2. This Plan contains several checks and balances that can, if properly implemented by the WYO Company, significantly reduce the need for extensive on-site reviews of the Company’s files by us or our designee. Furthermore, we believe that this process is consistent with customary reinsurance practices and avoids duplication of examinations performed under the auspices of individual State Insurance Departments, NAIC Zone examinations, and independent CPA firms. C. STANDARDS COMMITTEE ESTABLISHED 1. We establish in this Plan a Standards Committee for the WYO Program to oversee the performance of WYO companies under this Plan and to recommend appropriate remedial actions to the Administrator. The Standards Committee will review and recommend to the Administrator remedies for any adverse action arising from the implementation of the Financial Control Plan. Adverse actions include, but are not limited to, not renewing a particular company’s WYO Arrangement. WYO Financial Control Plan Requirements and Procedures Fifth Printing Overview 1 Revised: 12/1/99 2. The Administrator appoints the members of the Standards Committee, which consists of five (5) members from FIA, one (1) member from FEMA’s Office of Financial Management, and one (1) member from each of the six (6) designated WYO Companies, pools, or other entities. 3. A WYO company must: a. Have a biennial audit of the flood insurance financial statements conducted by a CPA firm at the Company’s expense to ensure that the financial data reported to us accurately represents the flood insurance activities of the Company. The CPA firm must conduct its audits in accordance with generally accepted auditing standards (GAAS) and the Government Auditing Standards issued by the Comptroller General of the United States (commonly known as "yellow book" requirements). The Company must file with us a report of the CPA firm’s detailed biennial audit, and, after our review of the audit report, we will convey our determination to the Standards Committee. b. Participate in a WYO Company/FIA Operation Review. We will conduct a review of the WYO Company’s flood insurance claims, underwriting, customer service, marketing, and litigation activities at least once every three (3) years. As part of these reviews, we will reconcile specific files with a listing of transactions submitted by the Company under the Transaction Record Reporting and Processing Plan (Part 5). We will file a report of the Operation Review with the Standards Committee (Part 7). c. Meet the recording and reporting requirements of the WYO Transaction Record Reporting and Processing (TRRP) Plan and the WYO Accounting Procedures Manual. The National Flood Insurance Program’s (NFIP) Bureau and Statistical Agent will analyze the transactions reported under the TRRP Plan and submit a monthly report to the WYO company and to us. The analysis will cover the timeliness of the WYO submissions, the disposition of transactions that do not pass systems edits, and the reconciliation of the totals generated from transaction reports with those submitted on the WYO Company’s reports (Parts 2 and 6). d. Cooperate with FEMA’s Office of Financial Management on Letter of Credit matters. e. Cooperate with us in the implementation of a Claims Reinspection Program (Part 3). f. Cooperate with us in the verification of risk rating information. g. Cooperate with FEMA’s Office of Inspector General on matters pertaining to fraud. WYO Financial Control Plan Requirements and Procedures Fifth Printing Overview 2 Revised: 12/1/99 D. This Plan incorporates by reference a separate document, The Write Your Own Program Financial Control Plan Requirements and Procedures, that contains the following parts, each of which is incorporated by reference into and is applicable to the Financial Control Plan: 1. Part 1—Financial Audits, Audits for Cause, and State Insurance Department Audits; 2. Part 2—Transaction Record Reporting and Processing Plan Reconciliation Procedures; 3. Part 3—Claims Reinspection Program; 4. Part 4—Report Certifications and Signature Authorizations; 5. Part 5—Transaction Record Reporting and Processing Plan; 6. Part 6—Write Your Own (WYO) Accounting Procedures Manual; and 7. Part 7—Operation Review Procedures. WYO Financial Control Plan Requirements and Procedures Fifth Printing Overview 3 Revised: 12/1/99 WRITE YOUR OWN PROGRAM FINANCIAL CONTROL PLAN REQUIREMENTS AND PROCEDURES PART 1 - FINANCIAL AUDITS, AUDITS FOR CAUSE, AND STATE INSURANCE DEPARTMENT AUDITS A. BIENNIAL FINANCIAL AUDIT The biennial financial audit is intended to provide the Federal Emergency Management Agency (FEMA) with an independent assessment of the quality of financial controls over activities relating to the Company's participation in the National Flood Insurance Program as well as of the integrity of the financial data being reported to FEMA. 1. Participating WYO companies are responsible for selecting and funding independent Certified Public Accounting (CPA) firms to conduct the biennial audits. Such costs are considered part of the normal administrative cost of operating the WYO Program and as such are included in the WYO expense allowance. 2. The WYO Company's representative will be notified in writing to arrange for a biennial audit. This notice should provide the WYO Company at least 120 days to prepare for the biennial audit. 3. It is also intended that the biennial audit will reduce, if not eliminate, the need for FEMA auditors or their designees to conduct on-site visits to WYO companies in their review of financial activity. However, the requirement may still exist for such visits to occur as determined by the auditors. The CPA firm's audit shall be performed in accordance with the “yellow book” requirements. Further, the CPA firm is required to select its own sample, even though the Federal Insurance Administration (FIA) may provide pre-selected policy and claim files for review. In addition, nothing in this section should be construed as limiting the ability of the General Accounting Office (GAO) or FEMA's Office of the Inspector General (OIG) to review the activities of the WYO Program. 4. Any WYO Company that has been subject to a comprehensive audit by the CPA firm under contract with the FEMA OIG is exempted by its selected CPA firm. Only the remaining unaudited fiscal year of the 2 years normally to be reviewed under the biennial audit need be examined. 5. The purpose of the biennial audit is to provide an “opinion” on the fairness of the financial statements, the adequacy of internal controls, and the extent of compliance with laws and regulations. In order to have a basis for an audit opinion, the independent CPA firm should audit, in addition to financial transactions, selected claim and policy files and selected claims and underwriting procedures. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 1 1-1 Revised: 12/1/99 B. BIENNIAL UNDERWRITING AUDIT Samples of new business policies, renewals, endorsements, and cancellations will be provided by the FIA with the biennial audit instructions, including samples of the Mortgage Portfolio Protection Program business, where applicable. The audit is to be conducted in accordance with GAO yellow book requirements. The CPA firm may supplement with its own sample of risks that were in force during all or part of the Arrangement Year under audit for detail testing. The audit shall include: 1. Review of the Underwriting Department’s responsibilities, authorities, and composition. 2. Personal interview with management and key clerical personnel to determine current processing activities, planned changes, and problems. 3. Administrative review to verify compliance with NFIP procedures. 4. Thorough examination of a random sample of underwriting files to measure the quality of work. The CPA firm is expected to provide a representative sample of its review to substantiate its opinion and findings. At a minimum, the files should be reviewed to verify the following: a. Policies are issued for eligible risks. b. Rates are correct and consistent with the amount of insurance requested on the application, or correctly adjusted. c. Waiting period for new business is consistent with government regulations. d. Elevation certification or difference is correctly shown on application. e. Coverage does not include more than one building and/or its contents per policy. f. No binder is effective unless issued with the authorization of FIA. g. FIRM zone shown on the application is applicable to the community in which the property is located. h. Community shown on application is eligible for insurance purchases under the NFIP. i. Information on type of building, etc., is fully complete. j. Applicable deductibles are recorded. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 1 1-2 Revised: 12/1/99 k. A new, fully completed application or a photocopy of the most recent application, or similar documentation, with the appropriate updates to reflect current information, is on file for each risk, including those formerly written by the NFIP Servicing Facility. l. If any files to be audited are unavailable, determine the reason for the absence. 5. Endorsement Processing a. Review requests for additional coverage to ensure that they are subject to the waiting period rule. b. Review controls established to ensure that, under endorsement provisions, no risk is insured that is not acceptable as a new business risk (e.g., a property located in a suspended community). 6. Cancellation Processing. Verify controls to ensure that one of the valid reasons for cancellation exists and that the transaction is accompanied by proper documentation. 7. Renewal Processing. Determine controls to ensure that all necessary information needed to complete the transaction is provided. 8. Expired Policies. Determine controls to ensure that each step is carried out at the proper time. 9. Observance of Waiting Period. Establish procedures to document, as a matter of WYO Company business record and in each transaction involving a new application, renewal, and endorsement, that any applicable effective date and premium receipt rules have been observed. Documentation reasonably suitable for the purpose includes retention of postmarked envelopes (for three (3) years from date); date-stamping and retention (via hard copy or microfilm process) of application, renewal, and endorsement documents and checks received in payment of premium; computer input of document and premium receipt transactions and retention of such records in the computer system; and other reasonable insurer methods of verifying transactions involving requests for coverage and receipts of premium. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 1 1-3 Revised: 12/1/99 C. BIENNIAL CLAIMS AUDIT The biennial claims audit includes the following activities: 1. Review of the Claims Department’s responsibilities, authorities, and composition. 2. Interviews with management, examining staff, and key clerical personnel to determine current processing activities, planned changes, and problems. 3. Administrative review to verify compliance with company procedures. 4. Thorough examination of a random sample of claims files that may be provided by FIA to measure the quality of work. At a minimum, the files should be reviewed to verify the following: a. Verify controls to ensure that a file is set up for each Notice of Loss received. b. Review adjuster reports to determine whether they contain adequate evidence to substantiate the payment or denial of claims, including amount of losses claimed, any salvage proceeds, depreciation, and potential subrogation. c. Ascertain that building and contents allocations are correct. d. Determine whether the file contains evidence identifying subrogation possibilities. e. Verify that partial payments were properly considered in processing the final draft or check. f. Verify that the loss payees are listed correctly (consider the insured and the mortgagee). g. Verify that the total amount of the drafts or checks is within the policy limits. h. Ascertain the relevance and validity of the criteria used by the carrier to judge effectiveness of its claims servicing operation. i. Confirm that, when information is received from an independent adjuster, the examiner either acts promptly to give proper feedback with instructions or takes action to pay or deny the loss. j. Determine whether the Claims Department is using an "impression of risk" program in reporting misrated policies, etc. k. Determine whether the Claims Department notifies the Underwriting Department when a total loss has occurred so the policy can be canceled. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 1 1-4 Revised: 12/1/99 l. Determine whether a CPA was used to determine the amount of the loss for commercial losses. m. Determine whether the prior claims history was reviewed before paying a current claim. n. Verify that the correct deductible was applied. If a claim was paid for land subsidence, sewer backup, or seepage, determine whether the additional $250 deductible was applied. o. Determine whether the co-insurance formula was properly applied to residential condominium building claims, including the determination of the correct replacement cost value of the building. p. Determine to the extent possible that the square footage measurements were correct. q. Verify that the unit prices used were within the established NFIP guidelines for the event. r. Determine that the calculation of square footage times unit price was correct. s. Where attempts at fraud occur, verify that these instances are being reported to FIA for referral to FEMA’s Office of the Inspector General. t. If any files to be audited are unavailable, determine the reason for their absence. In undertaking this portion of the biennial audit, the Claim Review Checklist (Exhibit 7-6) should be utilized. D. AUDITS FOR CAUSE In accordance with the terms of the Arrangement, the Administrator, on his/her own initiative or upon recommendation of the Standards Committee or FEMA’s Office of the Inspector General, may conduct for-cause audits of participating companies. The following criteria, in combination or independently, may constitute the basis for initiation of such an audit. 1. Underwriting a. Excessively high frequency of errors in underwriting: i. Issuing policies for ineligible risks. ii. Issuing policies in ineligible communities. iii. Consistent premium rating errors. iv. Missing or insufficient documentation for submit-for-rate policies. v. Other patterns of consistent errors. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 1 1-5 Revised: 12/1/99 b. Abnormally high rate of policy cancellations or non-renewals. c. Policies not processed in a timely fashion. d. Duplication of policy coverage noted. e. Relational type edits indicating an unusually high or low premium amount per policy for the geographical area. f. Biennial financial statement audit results indicating unusual volume of errors in underwriting. 2. Claims a. Reinspections indicate consistent patterns of: i. Losses being paid when not covered. ii. Statistical information being reported on original loss adjustment found to be incorrect on reinspection. iii. Salvage/subrogation not being adequately addressed. iv. Consistent overpayments of claims. b. Unusually high count of erroneous assignments and/or claims closed without payment (CWP). (WYO Company is paid a flat fee for CWP cases where little or no work is done—the risk is fraudulent CWP cases.) c. Unusually low count of CWP. (May indicate inadequate follow-up of claims.) d. Average claim payments that significantly exceed the NFIP-wide average. e. Lack of adequate documentation for paid claims. f. Claims not processed in a timely fashion. g. Consistent failure of WYO Company to receive authorization for Special Allocated Loss Adjustment Expenses (SALAE) prior to incurring them. h. High submission of Special Allocated Loss Adjustment Expenses (SALAE). i. Consistently high policyholder complaint level. j. Low/high count of salvage/subrogation. k. Biennial audit indicates significant problems. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 1 1-6 Revised: 12/1/99 3. Financial Reporting/Accounting a. Consistently high reconciliation variances and/or errors in statistical information. b. Financial and/or statistical information not received in a timely fashion. c. Letter of Credit violations are found. d. WYO Company is not depositing funds to the Restricted Account in a timely manner, or funds are not being transferred through the automated clearinghouse on a timely basis. e. Premium suspense is consistently significant, older than 60 days, and/or cannot be detailed sufficiently. f. Large/unusual balance in Cash -Other (Receivable or Payable). g. Large, unexplained differences in cash reconciliation. h. Large/unusual balances or variations between months noted for key reported financial data. i. Financial statement to statistical data reconciliation sheets improperly completed, indicating that proper review of information is not being performed prior to signing certification statement. j. Repeated failure to respond fully in a timely manner to questions raised by FIA or the NFIP Bureau and Statistical Agent concerning monthly financial reporting. k. Biennial audit indicates significant problems. E. STATE INSURANCE DEPARTMENT AUDITS 1. It is expected that audits of WYO Companies by independent accountants and/or state insurance departments, aside from those conducted by the FIA or its designee, will include flood insurance activity. When such audits occur, a financial officer for the WYO Company will notify the FIA, identifying the auditing entity and providing a brief statement of the overall conclusions that relate to flood insurance and the insurer's financial condition, when available. In the case of an audit in progress, a brief statement on the scope of the audit should be provided to the FIA. 2. The WYO Companies will maintain on file the reports resulting from audits, subject to on-site inspection by the FIA or its designee. At the FIA's request, the WYO Company will submit a copy of the auditor's opinion, should one be available, summarizing the audit conclusions. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 1 1-7 Revised: 12/1/99 PART 2 -TRANSACTION RECORD REPORTING AND PROCESSING PLAN RECONCILIATION PROCEDURES A. RECONCILIATION OBJECTIVES 1. The objectives of the Transaction Record Reporting and Processing Plan reconciliation procedures are to: a. Reconcile transaction detail with monthly financial statements submitted by the WYO Companies. b. Assess the quality and timeliness of submitted data. c. Provide a tool for the identification and resolution of discrepancies in the data. Reconciliation of the statistical reports submitted will be performed by the WYO Companies and independently by the NFIP Bureau and Statistical Agent. 2. Review of monthly financial statements and transaction level detail will involve the following areas: a. Financial Control f. Data Submission Monitoring Plan b. Quality Review of Submitted Data g. Front-End Balancing Procedure c. Policy Rating h. Reporting of WYO Companies to d. Timeliness of Reporting the Standards Committee and e. Monthly Reports the FIA Administrator B. FINANCIAL CONTROL 1. WYO Companies are required to submit a transmittal document with the submission of magnetic tape (wound on a reel or enclosed in a cartridge) containing transaction detail (see Exhibit 2-1). This document will be used to identify the submitted tape for processing. The transmittal document is not required if the statistical data is transmitted via the Internet. 2. WYO Companies are required to submit reconciliation statements (see Exhibit 2-2) with the transaction level detail. These statements will reconcile the transaction records data to selected financial statement entries. An explanation of any difference must be noted on the respective reconciliation statement. 3. The NFIP Bureau and Statistical Agent will review, at a minimum, the various reconciliation statements and produce a report reconciling the transaction data to selected monthly financial statement entries. 4. To facilitate financial reconciliation, transaction records that do not pass edits will be identified and maintained in the NFIP database until the error is corrected by the Company. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 2 2-1 Revised: 12/1/99 5. Transaction level detail will be maintained by the NFIP in policy and claim history files for recordkeeping and audit purposes. C. QUALITY REVIEW OF SUBMITTED DATA 1. Transaction records will be edited for correct format and values. 2. Informational and relational edits will be performed on individual policy and claim transactions, as well as between policy transactions and claim transactions submitted against those policies. 3. Record validation will be performed to determine whether the transaction is allowable for the policy or claim indicated. 4. Errors will be categorized as critical or non-critical. The percentage of critical errors in the submission of statistical data will be the basis by which Company performance is reported to the Standards Committee. Critical errors include those errors made in required data elements. Required data elements are those that: a. Identify the policyholder, the policy number, the loss, and the property location. b. Provide information necessary to rate the policy. c. Provide information used in financial control. d. Provide information used for actuarial review of NFIP experience. D. POLICY RATING The rating will be validated by the NFIP for all policies for which the following transactions have been submitted: 1. New Business 2. Renewals 3. Endorsements 4. Corrections of records previously submitted for premium transactions. Incorrect rating will be considered a critical error. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 2 2-2 Revised: 12/1/99 E. TIMELINESS OF REPORTING 1. WYO Companies will be expected to submit monthly financial, reconciliation, and certification statements no later than the last day of the calendar month following each month of record's closing. TRRP Plan statistical tapes are also due no later than the last day of the calendar month following the close of the month of record. 2. The NFIP will produce reports based on review of submitted data within 30 days after the due date or the first processing cycle subsequent to the receipt of WYO Company submissions, whichever is later. F. MONTHLY REPORTS 1. Reports for each WYO Company's data submission will be sent to the respective WYO Company and the FIA explaining any discrepancies found by the NFIP review. 2. Transaction records that fail to pass the quality review or policy rating edits will be reported to the appropriate WYO Company in transaction detail with error codes, classification of errors as either critical or non-critical, and any codes used by the Company to identify the source of the transaction data. 3. Reports to WYO Companies and the FIA a. Summary statistics will be generated for each monthly submission of transaction data. These will include: i. Absolute numbers of transactions read and transactions rejected by transaction type; and ii. Dollar amounts associated with transactions read and transactions rejected. b. Summary statistics for all policy and claim records submitted to date (which may each be the result of multiple transactions) will be generated separately for critical and non-critical errors. These will include: i. Absolute number of policy and claim records on file and those containing errors; and ii. Relative values for the number of records containing critical errors. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 2 2-3 Revised: 12/1/99 c. Control totals will be generated for tapes submitted to and processed by the NFIP. This front-end balancing procedure will include: i. Numbers of records submitted according to the NFIP compared with numbers of records submitted according to the WYO Company transmittal document; and ii. Dollar amounts submitted according to the NFIP compared with dollar amounts submitted according to the WYO Company transmittal document. d. If there is any discrepancy between the NFIP reading of dollar amounts from the tape and the WYO Company tape transmittal document, then the monthly statistical tape submission will be rejected and returned to the Company. The rejected tape must be corrected and resubmitted by the next monthly submission due date. e. In cases where the NFIP reconciliation of transaction level detail with the financial statements does not agree with the reconciliation report submitted by the WYO Company, a separate report will be generated and transmitted to the Company for resolution and to the FIA. G. DATA SUBMISSION MONITORING PLAN 1. Monthly reports and letters to the Principal Coordinator (PC), or possibly to a company executive at a higher organizational level, are used to focus management's attention, when required, on the quality and timeliness of reported data. The Standards Committee reviews company performance and the operation of the Data Submission Monitoring System, and makes recommendations to the FIA Administrator regarding Company appeals, further development of the system, and actions that may be necessary to ensure compliance with reporting requirements. 2. The FIA has provided the Standards Committee with established WYO Company performance standards with tolerance levels for critical errors under the Data Submission Monitoring Plan (refer to TRRP Plan for more detail): a. Performance will be assessed based on critical policy and claim errors that are uncorrected six (6) months after they are noted on the NFIP/ WYO system. Substandard performance for policy errors will be based on the number of policy records with critical errors exceeding an error tolerance level of five (5) percent. Substandard performance for claim errors will be based on the number of loss records with critical errors exceeding an error tolerance level of two (2) percent. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 2 2-4 Revised: 12/1/99 b. Performance will be assessed based on all critical policy and claim rejected transactions that remain uncorrected on the NFIP/ WYO system after six (6) months. Since critical rejects have premium, loss payments, or other expenses associated with them, there is no tolerance level and all must be corrected. H. FRONT-END BALANCING PROCEDURE Control totals will be generated for statistical data submitted by the WYO Company and processed by the NFIP. This front-end balancing procedure will include: 1. Numbers of records submitted according to NFIP reports as compared with numbers of records submitted according to the WYO Company's reconciliation documents. 2. Dollar amounts submitted according to NFIP reports as compared with dollar amounts reported according to the WYO Company's reconciliation documents. Any discrepancy found in the dollar amount or record count will require the WYO Company to submit corrected statistical data or correct the respective reconciliation statement before further processing will occur. The submitted statistical data will not be included in various NFIP monthly reports unless corrected data and/or a corrected reconciliation statement is received by the required due date. I. REPORTING OF COMPANY RATING TO THE STANDARDS COMMITTEE AND THE ADMINISTRATOR 1. Satisfactory Rating An annual end-of-year report will be submitted to convey the satisfactory rating of WYO Companies' submission of transaction data and the reconciliation of these data with financial reports. 2. Unsatisfactory Rating The report of an unsatisfactory rating will be submitted as soon as errors and problems reach critical threshold levels. This rating will be based on: continuing problems in reconciling transaction data with financial reports; statistics on the percentage of transactions submitted with critical errors; the percentage of policy and claim records on file that contain critical errors; and late submission of statistical and financial reports. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 2 2-5 Revised: 12/1/99 EXHIBIT 2-1 WYO TRRP TAPE SPECIFICATIONS TRANSMITTAL DOCUMENT DATE SENT: COMPANY NAME: NAIC NUMBER: ADDRESS: REEL NUMBER(S) OF ENCLOSED TAPES: TAPE LABEL: STANDARD LABEL or NON-LABELED (Please circle one.) FILE NAME (DSN): DENSITY: 6250 or 1600 (Please circle one.) TOTAL NUMBER OF RECORDS: CONTACT PERSON: CONTACT TELEPHONE NUMBER: IBU NUMBER: (NFIP USE ONLY) NOTE: This Transmittal Document is not required for Internet transmission. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 2 2-6 Revised: 12/1/99 EXHIBIT 2-2 RECONCILIATION STATEMENTS (Page 1 of 5) MONTHLY RECONCILIATION – NET WRITTEN PREMIUMS COMPANY NAME CO. NAIC NUMBER MONTH/YEAR ENDING DATE SUBMITTED PREPARER’S NAME TELEPHONE NO. MONTHLY MONTHLY STATISTICAL FINANCIAL REPORT TRANSACTION REPORT NET WRITTEN TRANS. RECORD PREMIUM PREMIUMS: $ CODE COUNT AMOUNT (INCOME STATEMENT -11 $ Line 100) 15 17 UNPROCESSED STATISTICAL: 20 (+) PRIOR MONTH’S 23 (-) CURRENT MONTH’S 26 OTHER – EXPLAIN: 29 (1) (2) 14 AND 81 99 TOTAL: $ TOTAL: $ * * (ADD 11 THROUGH 23 LESS 26 AND 29) COMMENTS: WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 2 2-7 Revised: 12/1/99 EXHIBIT 2-2 RECONCILIATION STATEMENTS (Page 2 of 5) MONTHLY RECONCILIATION – NET FEDERAL POLICY FEES COMPANY NAME CO. NAIC NUMBER MONTH/YEAR ENDING DATE SUBMITTED MONTHLY MONTHLY STATISTICAL FINANCIAL REPORT TRANSACTION REPORT NET FEDERAL TRANS. RECORD FEE POLICY FEES: $ CODE COUNT AMOUNT (INCOME STATEMENT -11 $ Line 170) UNPROCESSED STATISTICAL: (+) PRIOR MONTH’S (-) CURRENT MONTH’S OTHER – EXPLAIN: (1) (2) 15 17 20 23 26 29 TOTAL: $ TOTAL: $ * * (ADD 11 THROUGH 23 LESS 26 AND 29) COMMENTS: WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 2 2-8 Revised: 12/1/99 EXHIBIT 2-2 RECONCILIATION STATEMENTS (Page 3 of 5) MONTHLY RECONCILIATION -NET PAID LOSSES COMPANY NAME CO. NAIC NUMBER MONTH/YEAR ENDING DATE SUBMITTED 100 NET PAID LOSSES $ (INCOME STATEMENT – Line 115) UNPROCESSED STATISTICAL: 140 (+) PRIOR MONTH’S 150 (-) CURRENT MONTH’S 160 SALVAGE NOT TO BE REPORTED BY TRANSACTION (EXPLAIN) 170 OTHER – EXPLAIN: (1) (2) TOTAL: $ (SUM OF Lines 100, 140, 160, AND 170 LESS 150) TRANS. RECORD CODE COUNT 31 34 37 40 43 46 AND 61 49 64 84 AND 87 52 RECOVERY SALVAGE SUBROGATION 67 RECOVERY SALVAGE SUBROGATION TOTAL: *(ADD 31, 34, 40 THROUGH 64, LESS 52 AND 67) LOSS/PAID RECOVERIES $ $* COMMENTS: WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 2 2-9 Revised: 12/1/99 EXHIBIT 2-2 RECONCILIATION STATEMENTS (Page 4 of 5) MONTHLY RECONCILIATION -SPECIAL ALLOCATED LAE COMPANY NAME CO. NAIC NUMBER MONTH/YEAR ENDING DATE SUBMITTED MONTHLY MONTHLY STATISTICAL FINANCIAL REPORT TRANSACTION REPORT SPECIAL ALLOCATED TRANS. RECORD SALAE LOSS ADJUSTMENT CODE COUNT AMOUNTS EXPENSES $ (OTHER LOSS AND LAE CALC. – Line 655) UNPROCESSED STATISTICAL: (+) PRIOR MONTH’S (-) CURRENT MONTH’S OTHER – EXPLAIN: (1) (2) 71 $ 74 TOTAL: $ TOTAL: $ COMMENTS: WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 2 2-10 Revised: 12/1/99 EXHIBIT 2-2 RECONCILIATION STATEMENTS (Page 5 of 5) MONTHLY RECONCILIATION -CASE LOSS RESERVE COMPANY NAME CO. NAIC NUMBER MONTH/YEAR ENDING DATE SUBMITTED NUMBER OF OPEN CLAIM TOTAL AMOUNT CASES WITH RESERVES OF RESERVES $ (BALANCE SHEET ITEMS – LINE 325 CURRENT MONTH COLUMN) WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 2 2-11 Revised: 12/1/99 PART 3 -CLAIMS REINSPECTION PROGRAM A. OBJECTIVES The FIA and WYO Companies have established a Claims Reinspection Program with the following objectives: 1. To keep FIA and the NFIP Bureau and Statistical Agent Claims Management informed. 2. To assist in the overall claims operation. 3. To provide necessary assurances and documentation for dealing with the General Accounting Office, Congressional Oversight Committees, and the public. B. MAJOR ELEMENTS The Program is comprised of the following major elements: 1. All files are subject to reinspection. 2. There are two types of reinspections as follows: a. Routine. b. Special Assist. 3. Files for reinspection may be randomly selected by flood event, size of loss, or class of business, as directed by FIA. If possible, the NFIP Bureau and Statistical Agent General Adjuster will select the files to be reinspected. 4. The number of open claims routinely reinspected for each FICO-designated event is determined by the binomial sampling chart (Exhibit 3-1). If a Company's error rate exceeds a three (3) percent threshold, then the conclusion is that additional training needs to be provided to the Company's claims adjusters and additional files may be reinspected at FIA’s request. 5. Special Assist reinspections are precipitated by a written request from the WYO Company claims coordinator or direction (oral or written) from the FIA. These reinspections involve specific claim situations that require a General Adjuster's intervention. Special Assist reinspections will also be conducted, as directed by FIA, in unusual situations, such as a large number of condominium losses or other large or complicated losses or when there are problems with elevated buildings. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 3 3-1 Revised: 12/1/99 6. An NFIP Bureau and Statistical Agent General Adjuster will conduct all reinspections, accompanied a WYO Company representative. 7. A joint, single report will be issued and signed by the NFIP Bureau and Statistical Agent General Adjuster and the WYO Company representative. The reinspection report, adapted for flood insurance business, is in the format of the NFIP Reinspection Report (593-105A) (see Exhibit 3-2). 8. Copies of the reinspection reports will be forwarded to the Claims Management of both the WYO Company and the FIA Claims Reinspection Program Manager. C. SAMPLING PROCEDURES The specific sampling procedures utilized by the Claims Reinspection Program are as follows: 1. Reinspections are conducted principally on open claims files. The NFIP Bureau and Statistical Agent will notify the WYO Companies selected for reinspection and determine the number of claims to reinspect using the binomial table (Exhibit 3-1). 2. FIA allows each company a three (3) percent error rate. Every company that has reported 400 or more claims for a FICO-designated event is considered a large company and will be considered for participation in the reinspection program. Using the binomial table and based upon the acceptable three (3) percent error rate, the General Adjuster should reinspect the corresponding number of claims. 3. If, based on the General Adjuster's findings, the company's error rate exceeds three (3) percent, the General Adjuster will reinspect additional claims that will amount to the difference between the three (3) percent sample size and the company's actual error rate sample size. 4. A Company that has fewer than 400 claims for a flooding event is considered a small claim volume company. Claims of small volume companies will be reinspected as NFIP Bureau and Statistical Agent staffing and time allow. 5. If a large company's error rate exceeds ten (10) percent in any month, or exceeds three (3) percent twice in a 6-month period, additional training is warranted and additional action could be taken by FIA. 6. Additional training is also warranted if the sampled claim volume error rate for small claim volume companies exceeds three (3) percent more than three times in an 18-month period. 7. The General Adjuster will use the three-part Reinspection Report Form 593-105A (Exhibit 3-2). The form should be completed in full and signed by both the WYO Company representative and the General Adjuster to indicate their concurrence with the reinspection. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 3 3-2 Revised: 12/1/99 EXHIBIT 3-1 BINOMIAL TABLE NATIONAL FLOOD INSURANCE PROGRAM Company’s Total Claims 400 500 600 700 800 900 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 6,000 7,000 8,000 9,000 10,000 12,500 15,000 . Number Sampled 3.0% 4.0% 5.0% 6.0% 7.0% 42 54 65 74 83 43 55 67 77 87 44 56 68 79 89 44 57 69 81 91 45 58 70 82 93 45 58 71 83 94 45 58 71 83 95 46 60 73 86 98 46 60 74 87 100 46 60 74 88 101 46 61 75 88 101 46 61 75 88 102 47 61 75 89 102 47 61 75 89 102 47 61 75 89 103 47 61 76 89 103 47 61 76 90 103 47 61 76 90 103 47 62 76 90 103 47 62 76 90 104 47 62 76 90 104 47 62 76 90 104 WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 3 3-3 Revised: 12/1/99 EXHIBIT 3-2 REINSPECTION REPORT (Page 1 of 3) WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 3 3-4 Revised: 12/1/99 EXHIBIT 3-2 REINSPECTION REPORT (Page 2 of 3) WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 3 3-5 Revised: 12/1/99 EXHIBIT 3-2 REINSPECTION REPORT (Page 3 of 3) WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 3 3-6 Revised: 12/1/99 PART 4 -REPORT CERTIFICATIONS AND SIGNATURE AUTHORIZATIONS A. REPORT CERTIFICATIONS The Financial Control Plan Requirements and Procedures document stipulates that Report Certification Statements must be signed monthly by responsible Company officers. The two Certification Statements to be signed are described below. 1. Certification Statement for Monthly Financial and Statistical Reconciliation Reports This statement (Exhibit 4-1) relates to the entries recorded on both the financial statements and the reconciliation statements. It certifies that the entries on both documents have been reviewed and that all information included on these documents is the representation of the Company. If a material modification is to be made, an explanation should be provided on this form. This form must be signed and dated by the financial officer who reviewed the documentation. 2. Certification Statement for Monthly Statistical Transaction Report This statement (Exhibit 4-2) relates to the data contained on the monthly statistical tape from which certain balance totals (Net Written Premium, Net Paid Losses, Net Federal Policy Fees, and Special Allocated Loss Adjustment Expenses) are developed. It certifies that these balance totals used in the reconciliation statement processing are the representation of the Company. If a material modification is to be made, an explanation should be provided on this form. The form must be signed and dated by the responsible reporting officer who reviewed the statistical documentation. B. SIGNATURE AUTHORIZATIONS Certification Statements can be signed only by those individuals so designated by the Company. A record of authorized signers (Exhibits 4-3 and 4-4) is maintained by the NFIP Bureau and Statistical Agent. Any change or addition to the designated signer list must be communicated to the NFIP Bureau and Statistical Agent. This can be done by contacting your WYO Program Coordinator (formerly called Account Executive) at the following address: NFIP Bureau and Statistical Agent Attention: WYO Program Coordinator 7700 Hubble Drive Lanham, MD 20706 WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 4 4-1 Revised: 12/1/99 EXHIBIT 4-1 CERTIFICATION STATEMENT FOR MONTHLY FINANCIAL AND STATISTICAL RECONCILIATION REPORTS I have reviewed the accompanying financial and statistical reconciliation reports of Company as of . All information included in these statements is the representation of the Company. Based on my review (with the exception of the matter(s) described in the following paragraphs, if applicable), I certify that I am not aware of any material modifications that should be made to the accompanying reports. SIGNED (Responsible Financial Officer) DATE WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 4 4-2 Revised: 12/1/99 EXHIBIT 4-2 CERTIFICATION STATEMENT FOR MONTHLY STATISTICAL TRANSACTION REPORT I have reviewed the accompanying statistical transaction report control totals in conjunction with appropriate statistical reconciliation reports for the reporting period. All information included in these reports is the representation of the Company. SIGNED (Responsible Reporting Officer) DATE WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 4 4-3 Revised: 12/1/99 EXHIBIT 4-3 SIGNATURE AUTHORIZATION FOR MONTHLY FINANCIAL AND STATISTICAL RECONCILIATION REPORTS Write Your Own Company: I hereby designate the individual(s) listed below as the responsible financial officer to act as signatory for the Financial and Statistical Reconciliation Reports for my company. This individual(s) understands that he/she is responsible for the accuracy and completeness of these reports. Authorizing Officer of the Company (Please type name and title) Signature and Date: Responsible Financial Officer(s): Company Individual(s) 1. (Please type name) (Please type title) (Signature) 2. (Please type name) (Please type title) (Signature) 3. (Please type name) (Please type title) (Signature) Vendor Individual(s) 1. 2. 3. (Please type name) (Please type title) (Signature) (Please type name) (Please type title) (Signature) (Please type name) (Please type title) (Signature) Return to: NFIP Bureau and Statistical Agent Attention: WYO Program Coordinator 7700 Hubble Drive Lanham, MD 20706 WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 4 4-4 Revised: 12/1/99 EXHIBIT 4-4 SIGNATURE AUTHORIZATION FOR MONTHLY STATISTICAL TRANSACTION REPORT Write Your Own Company: I hereby designate the individual(s) listed below as the responsible reporting officer to act as signatory for the Statistical Transaction Report for my company. This individual(s) understands that he/she is responsible for the accuracy and completeness of these reports. Authorizing Officer of the Company (Please type name and title) Signature and Date: Responsible Reporting Officer(s): Company Individual(s) 1. (Please type name) (Please type title) (Signature) 2. (Please type name) (Please type title) (Signature) 3. (Please type name) (Please type title) (Signature) Vendor Individual(s) 1. 2. 3. (Please type name) (Please type title) (Signature) (Please type name) (Please type title) (Signature) (Please type name) (Please type title) (Signature) Return to: NFIP Bureau and Statistical Agent Attention: WYO Program Coordinator 7700 Hubble Drive Lanham, MD 20706 WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 4 4-5 Revised: 12/1/99 PART 5 -TRANSACTION RECORD REPORTING AND PROCESSING PLAN Refer to the document for the specific NFIP requirements. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 5 5-1 Revised: 12/1/99 PART 6 - WRITE YOUR OWN (WYO) ACCOUNTING PROCEDURES MANUAL Refer to the document for the specific NFIP requirements. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 6 6-1 Revised: 12/1/99 PART 7 - OPERATION REVIEW PROCEDURES Operation Reviews will be conducted at the location (WYO company office or vendor office) where the applications are reviewed and underwritten, or where the claim files are examined. When the review is done at the office of the vendor, the review serves for the companies serviced by that vendor that have requested to be included in the vendor Operation Review. If a WYO company processes and underwrites applications at more than one location, a separate Underwriting Operation Review will be conducted for each location. A. UNDERWRITING/POLICY ADMINISTRATION OPERATION REVIEW OUTLINE AND PROCEDURES 1. WYO Company Summary Report. An overview will be provided by the WYO Company to the FIA underwriter, if requested, prior to the on-site review. See Exhibit 7-1. 2. Administrative Review Report. The review provides for the identification of and compliance with existing administrative, technical, and functional policies or procedures. Exhibit 7-2, the use of which is optional, provides a sample format for this review. 3. Operational Activity (Applications, Policy and Endorsement Issuance, Cancellations). The review provides for a 3-year analysis of operational activities as follows: a. Analysis of policies in force, applications entered, declinations, and cancellations. b. Analysis of type of business (Dwelling, General Property, and Residential Condominium Building Association Policy business). c. Analysis of renewal processing systems. d. Analysis of endorsement processing. e. Analysis of observance of effective date rules relative to the above, as detailed in Part 1, under “B. Biennial Underwriting Audit,” at “9. Observance of Waiting Period.” 4. File Review. The review provides for a sampling of policy files. The general details to be covered in the individual files are in the Specific Risk Review Checklist (Exhibit 7-3). Also, an Underwriting Review Summary (Exhibit 7-4), the use of which is optional, provides a sample format for the Risk Review portion of the report. The number of files reviewed shall be as follows: a. At a WYO company’s office - WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-1 Revised: 12/1/99 Total Policies Written Policies Reviewed 0 – 24,999 50 75 75,000 or more 100 25,000 – 74,999 b. At a vendor’s office - A minimum of 100 files will be reviewed subject to the following: • 25 files from any company writing at least 25,000 policies. • 50 files from any company writing at least 100,000 policies. 5. Rating. A review of rating activity will cover the following areas: a. Internal review of rating accuracy. b. Use of specific rates. c. Correction procedure. d. Timeliness of service. e. Training procedures for staff and/or agents. 6. Rating Data Verification. A sampling of risks will be reviewed. A check will be made to determine: a. Type of occupancy. h. Community. b. Type of structure. i. Zone. c. Number of floors. j. Elevation from Elevation Certificate. d. Basement type. k. Floodproofing. e. Elevated with enclosures. l. Mortgagee. f. Contents location. m. Deductible. g. Program. n. Condominium. Phone calls or on-site physical inspections of selected risks may be undertaken at the discretion of the WYO Company and the FIA Underwriting Division. 7. Review of Appeals and/or Complaints (those to the Insurance Department and those filed directly with the WYO Company). The review will include the following: a. Analysis of actions. b. Analysis of average time frame required to resolve these cases. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-2 Revised: 12/1/99 8. Reports. The FIA underwriter or designee will file a report of the Operation Review with the WYO Company representative, the Standards Committee, and the Administrator. The minimum level of detail in the report will be as follows: a. Satisfactory Rating The report will contain the time, place, and a list of participants in the review process. It will also contain the number of files examined along with any appropriate comments on their accuracy and condition. b. Unsatisfactory Rating The report will be written as specifically as possible. Each unsatisfactory condition will be described and documented. Recommendations to the WYO Company representative on steps to be taken to rectify any delay, error, or omission will be clearly stated with a time frame in which the corrective action will be accomplished. Follow-up procedures will be worked out with the WYO Company’s representative, which will indicate the dates any progress reports would be filed with the Administrator. An Audit for Cause will be conducted to confirm that all necessary corrective actions have been taken. The rating criterion is an overall error percentage. The overall error percentage will be applied to a standard and a rating will be developed. An overall error percentage equal to or greater than 10 to 20 percent, depending on the number of elevation-rated risks selected for review, would be a basis for an unsatisfactory rating. The overall percentage would be developed from the results of the file review. The errors on a file will be categorized as either critical or non-critical. One or more critical errors or three or more non-critical errors identified in a file would be considered as only one error when developing the overall error percentage. The determination of what constitutes a critical or non-critical error will be based on established significant conditions. For example, critical error conditions will be as follows: i. Any error that impacted the correct rating of the policy (coverage amount, zone), or an endorsement. ii. The insuring of an ineligible risk. iii. The failure to obtain the information necessary to properly identify and underwrite a risk. iv. The issuance of a policy with an incorrect policy term. v. Any error that impacts the correct return premium on a cancellation or nullification. vi. The processing of a cancellation or nullification for an invalid reason. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-3 Revised: 12/1/99 EXHIBIT 7-1 WYO COMPANY SUMMARY REPORT The WYO Company will prepare, upon request, a report summarizing the flood insurance operation within the Company, including the following items: 1. A general statement describing the nature of the operational setup, whether in-house or through a vendor. 2. If in-house, the number of processing locations, person in charge of operations, staffing arrangement as appropriate, and operating relationships to other insurance activities. 3. If through a vendor, name and address, number of states involved, WYO Company representative responsible for dealing with vendor. 4. Optionally, exhibits and flow charts as appropriate. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-4 Revised: 12/1/99 EXHIBIT 7-2 ADMINISTRATIVE REVIEW REPORT A report will be prepared covering all or some of the following points, summarizing the activity in each area (as appropriate), giving examples, and identifying those areas in need of attention. 1. Policywriting, Rating, and Endorsements: a. Prompt within service guidelines? b. Is policy writing audited? c. Are policy writing errors held to a minimum? d. Is satisfactory action normally taken to ensure established eligibility standards are met? e. Are there adequate procedures for handling specifically rated property? 2. Bulletins, Guidelines, and Manuals: a. Does each underwriter, policy writer, rater, and coder have proper manuals available for use? b. Is there a procedure for maintaining manuals? 3. Correspondence Files: a. Are they in good order? b. Are retention procedures satisfactory? 4. Cancellation and Declination: a. Are procedures understood and requirements knowledgeably attended to? 5. New Business: a. Are applications being properly checked? 6. Specific Risk Review: a. Review areas that need attention from Specific Risk Review Checklist (Exhibit 7-3) giving examples and recommendations for improvement. 7. Renewal Procedures: a. Are they satisfactory? b. Are non-renewal procedures satisfactory? 8. Mortgagee Procedures: a. Are they satisfactory? WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-5 Revised: 12/1/99 EXHIBIT 7-3 SPECIFIC RISK REVIEW CHECKLIST (Page 1 of 2) Date: __________________ Occupancy: ( ) Single family ( ) 2-4 family ( ) Other residential ( ) Non-residential Policy no. ______________ Amount of insurance: Building _______________________________ Contents ______________________________ Zone: _________________________ Number of floors: ________________ Condominium: ( ) Yes ( ) No ______________ Basement: ( ) Yes ( ) No ______________ Elevated building: ( ) Yes ( ) No ______________ Complete when appropriate: Elevation difference _________________________ Base flood elevation _________________________ Lowest floor elevation ________________________ Grade elevation _____________________________ Obstruction below elevated building ( ) Yes ( ) No ______________ Criteria Yes No Comment if checked “No” Application: Properly completed? Met eligibility—location requirements? Policy: Properly issued? Required premium received? (If coverage was reduced to the amount that could be purchased with the premium submitted, check yes.) Are coverage limits within NFIP statutory allowances? Waiting period observed? Endorsements, renewals, cancellations: Properly issued? Required premium received or returned? Waiting period observed? WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-6 Revised: 12/1/99 EXHIBIT 7-3 SPECIFIC RISK REVIEW CHECKLIST (Page 2 of 2) Criteria Yes No Comment if checked “No” Additional documentation: Is Elevation Certificate information valid and complete? If specifically rated, has company obtained the required information? File satisfactory for: Service within guidelines? Recertification? Comments—FIA Examiner Comments—WYO Company Underwriter Resolution WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-7 Revised: 12/1/99 EXHIBIT 7-4 UNDERWRITING REVIEW SUMMARY Type of file or item Total number reviewed Total number held for manager 1. General property (commercial) files 2. Single-family and 2-4 family dwelling files 3. Multi-family dwelling and other general property files 4. RCBAP1 files 5. Quote files 6. Declination files Community not eligible Incomplete application (unable to rate) Risk not eligible Premium not submitted Premium not sufficient 7. Other (designate type) 8. 9. 10. 1RCBAP is the Residential Condominium Building Association Policy. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-8 Revised: 12/1/99 B. CLAIMS OPERATION REVIEW OBJECTIVES, OUTLINE, AND PROCEDURES The WYO Company’s Claims Manager will be notified in writing of the FIA examiner’s plans to conduct an Operation Review. This notice will provide the WYO Company at least 30 days to prepare for the Operation Review. 1. Objectives The objectives are to establish procedures by which the FIA examiner or designee will conduct at least a triennial review of a WYO Company’s flood insurance claims administration activities. These Claims Operation Reviews should: a. Evaluate with the WYO Company’s Claims Manager or designee the claims administration processes used to settle flood insurance claims, provide financial and statistical data to the NFIP, and ensure accuracy and service in the handling of claims. b. Evaluate the timeliness and accuracy of actual transactions submitted in accordance with the Transaction Record Reporting and Processing Plan instructions. Up to five (5) percent, but not less than 50, of the claim files opened during the period covered by the Review should be matched with printed transaction data extracted from NFIP statistical records. c. Provide the WYO Company’s Claims Manager a briefing on the results of the evaluation under objectives a. and b. above to facilitate improvements in the claims administration processes. d. Provide the WYO Company’s Claims Manager an opportunity to respond to the evaluation and resolve outstanding matters. e. Establish a schedule under which the FIA examiner and/or the WYO Company’s Claims Manager should provide additional information on matters still outstanding at the conclusion of the on-site visit. f. Provide the WYO Company’s Claims Manager with a copy of the draft report. The WYO Company’s Claims Manager should be provided with a reasonable amount of time to respond in writing. The WYO Company’s written response is to be made part of the Operation Review Report. g. Provide the Standards Committee with a report on the Operation Review. 2. Outline and Procedures Following is a suggested Claims Operation Review outline and procedures. The precise review format and the techniques employed to fulfill review objectives for a specific WYO Company would be based upon the Company’s processing environment and organizational configuration. The following information also could be used as a guideline for a WYO Company’s self-audit program. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-9 Revised: 12/1/99 a. Claim Department’s Responsibilities, Authorities, and Composition. An overview of the Department’s responsibilities, authorities, and staffing composition (managerial, technical, and clerical) will be provided by the WYO Company to the FIA examiner (Exhibit 7-5) prior to the on-site review. The overview will contain the following information: i. Statement of Primary Function(s). ii. Relationship. (a) WYO Company Management. (b) Claim Division (FIA). iii. Responsibilities and Authorities. iv. Staffing Composition. b. Claim Review. The review provides for the identification of and compliance with existing administrative, technical and functional policies or procedures. It examines relationships with other WYO Company Departments (Executive, Accounting, Underwriting, and Data Processing) and inquires as to the adequacy of controls and security. i. Administrative Policies and/or Procedures. ii. Technical Procedures. iii. Functional (Clerical) Procedures. In undertaking this portion of the examination, the Claim Review Checklist (Exhibit 7-6) would be utilized. c. Claim Volumes—Payment (Loss and Expense) Review. The review will provide for a 3-year analysis of claim frequency and payment (loss and allocated expense) figures. Also, it will inquire into distribution of losses by size of loss and examine unallocated expenses. The analysis will be as follows: i. Analysis of Claim Volumes and Payments (Exhibit 7-7). ii. Analysis of Special Allocated Claims Expenses (Exhibit 7-7). iii. Analysis of Salvage and Subrogation Recoveries (Exhibit 7-7). iv. Analysis of Recovery Results (Exhibit 7-7). v. Analysis of Claims by Size of Claim (Exhibit 7-8a). vi. Analysis of Loss Reserves (Exhibit 7-8b). d. Review of Appeals and/or Complaints (those to the Insurance Department and those filed directly with the WYO Company). The review will include the following: i. Analysis of actions. ii. Analysis of average time frame required to resolve these cases. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-10 Revised: 12/1/99 e. File Review. It provides for a thorough examination of a random sampling of claim files to measure the quality of investigations, adjustments, and supervision. The Claim Review Summary Worksheet (Exhibit 7-9) will be completed on each file examined. Specific comments on the file will be indicated on the worksheet. Further audit letters (Exhibits 7-10 and 7-11) will be sent on a representative number of closed cases. Any circumstances indicating a substantive variance from existing Underwriting Rules will be communicated to the Underwriting Review Team (if present) and to the WYO Company’s Underwriting Department. f. Worksheet Files. The FIA Insurance Examiner or designee will maintain separate operation review files for each Company. These files and any draft report written that relies on these files will include the WYO Company’s responses. At the WYO Company’s request, the FIA Insurance Examiner will provide a copy of these files to the WYO Company’s Claims Manager. g. Reports. The FIA Insurance Examiner or designee will file a report of the Operation Review with the WYO Company (Claims Manager and Internal Audit Manager), the Standards Committee, and the Administrator. The minimum level of detail in the report will be as follows: i. Satisfactory Rating The report will contain the time, place, and a list of participants in the review process. It will contain the number of files examined and any comments on their accuracy and condition that would be appropriate. ii. Unsatisfactory Rating The report will be written as specifically as possible. Each unsatisfactory condition will be described and supported by documentation. Recommendations to the WYO Company’s Claims Manager on steps to be taken to rectify any delay, error, or omission will be clearly stated with a time frame in which the corrective action would be accomplished. Follow-up procedures will be worked out with the WYO Company’s Claims Manager, which will indicate the dates progress reports would be filed with the Administrator. An Audit for Cause will be conducted to confirm that all necessary corrective actions have been taken. The rating criterion is an overall error percentage. The overall error percentage will be applied to a standard and a rating will be developed. An overall error percentage of 20 percent or higher would be a basis for an unsatisfactory rating. The overall percentage would be developed from the results of the file review. The errors on a file will be categorized as either WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-11 Revised: 12/1/99 critical or non-critical. One or more critical errors or three or more non-critical errors identified in a file would be considered as only one error when developing the overall error percentage. The determination of what constitutes a critical or non-critical error will be based on established significant conditions. For example, critical error conditions will be as follows: (a) An error that resulted in a claim payment where no coverage was present. (b) An error that resulted in an incorrect payment amount. (c) Failure to process a claim in accordance with established procedures, which caused significant delay in closing. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-12 Revised: 12/1/99 EXHIBIT 7-5 CLAIM DEPARTMENT RESPONSIBILITIES, AUTHORITIES, AND COMPOSITION The WYO Company will prepare a report summarizing the flood insurance Claim Department’s organizational position within the Company and the resources available to perform the claims settlement function. 1. Attach Organization Chart. a. Indicate lines of authority and functional dependencies for only those departments involved in the WYO Company’s flood insurance activities. b. Show the names of key personnel involved in the WYO Company’s flood insurance activities. 2. Attach exhibits and the written description of the information required under item 2.a on page 7-10, under “B. Claims Operation Review Objectives, Outline, and Procedures.” WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-13 Revised: 12/1/99 EXHIBIT 7-6 CLAIM REVIEW CHECKLIST (Page 1 of 5) Policy no.: Insured's name: State: Date of loss: Date paid: Date reported: Amt. of loss: $ Building: $ Contents: $ Adjusting firm: Examiner's name: Comments: WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-14 Revised: 12/1/99 EXHIBIT 7-6 CLAIM REVIEW CHECKLIST (Page 2 of 5) I. INVESTIGATION AND ADJUSTMENT A. Application of Coverage Yes No N/A 1. Insurable interest? ( ) ( ) ( ) 2. Is loss from the flood peril? ( ) ( ) ( ) 3. Did loss occur within the policy term? ( ) ( ) ( ) 4. Does location and description of risk coincide with policy information? ( ) ( ) ( ) 5. Were proper deductibles applied? ( ) ( ) ( ) 6. Other insurance considered? ( ) ( ) ( ) 7. Other losses? ( ) ( ) ( ) B. Application of Sound Adjusting Practices Yes No N/A 1. Was adjuster's report accurate/complete? ( ) ( ) ( ) 2. Was an attorney used in the settlement? ( ) ( ) ( ) 3. Was a technical expert used in the settlement? ( ) ( ) ( ) C. Documentation Yes No N/A 1. Are damages clearly identified? ( ) ( ) ( ) 2. Are damages flood related? ( ) ( ) ( ) 3. Are damages clearly and completely itemized and documented by the adjuster? ( ) ( ) ( ) 4. Was depreciation considered? ( ) ( ) ( ) 5. Has subrogation been considered? ( ) ( ) ( ) WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-15 Revised: 12/1/99 EXHIBIT 7-6 CLAIM REVIEW CHECKLIST (Page 3 of 5) Yes No N/A 6. Has salvage been properly handled? ( ) ( ) ( ) 7. Was salvage timely? ( ) ( ) ( ) II. SUPERVISION A. Assignments Yes No N/A 1. Are assignments made promptly? ( ) ( ) ( ) 2. Is insured contacted promptly? ( ) ( ) ( ) B. Reserves Yes No N/A 1. Are initial reserves indicated on the first report? ( ) ( ) ( ) 2. Are they adequate? ( ) ( ) ( ) 3. Does final settlement compare favorably with last reserve established? ( ) ( ) ( ) C. Diary Control Yes No N/A 1. Automatic? ( ) ( ) ( ) 2. Timely? ( ) ( ) ( ) 3. Is file reviewed at diary date with examiner's comments? ( ) ( ) ( ) D. Examiner Evaluation and Settlement Performances Yes No N/A 1. Is examiner directing adjuster when needed? ( ) ( ) ( ) 2. Are files documented? ( ) ( ) ( ) WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-16 Revised: 12/1/99 EXHIBIT 7-6 CLAIM REVIEW CHECKLIST (Page 4 of 5) Yes No N/A 3. Is adequate control maintained over in-house adjuster? ( ) ( ) ( ) 4. Is adequate control maintained over outside adjuster? ( ) ( ) ( ) E. Salvage and Subrogation Yes No N/A 1. Is salvage evaluated by salvors? ( ) ( ) ( ) 2. Is salvage disposed of promptly? ( ) ( ) ( ) 3. Are salvage returns adequate? ( ) ( ) ( ) 4. Is potential subrogation being promptly and properly investigated? ( ) ( ) ( ) 5. Are proper subrogation forms used? ( ) ( ) ( ) 6. Are subrogation and salvage files properly opened, diaried, and referred (if appropriate)? ( ) ( ) ( ) 7. Are recovery funds for subrogation and salvage being properly handled? ( ) ( ) ( ) F. Suits Yes No N/A 1. Are suits properly identified? ( ) ( ) ( ) 2. Are suits being properly evaluated? ( ) ( ) ( ) 3. Are suits being referred to attorneys properly? ( ) ( ) ( ) 4. Are attorneys being advised as to handling settlement or compromise? ( ) ( ) ( ) 5. Are suits being properly controlled? ( ) ( ) ( ) 6. Are suit files properly diaried? ( ) ( ) ( ) 7.--8. [Reserved] WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-17 Revised: 12/1/99 EXHIBIT 7-6 CLAIM REVIEW CHECKLIST (Page 5 of 5) G. Other Yes No N/A 1. Was there other coverage by the WYO Company? ( ) ( ) ( ) 2. Were damages correctly apportioned? ( ) ( ) ( ) 3. Was a solo adjuster used? ( ) ( ) ( ) 4. Were there prior flood claims? ( ) ( ) ( ) 5. Were prior damages repaired? ( ) ( ) ( ) 6. Were prior claim files reviewed? ( ) ( ) ( ) 7. Was a Congressional complaint letter in file? ( ) ( ) ( ) 8. Was it responded to promptly? ( ) ( ) ( ) 9. Is the statistical reporting correction file being properly managed? ( ) ( ) ( ) WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-18 Revised: 12/1/99 EXHIBIT 7-7 ANALYSIS OF CLAIM VOLUMES AND PAYMENTS Claim Volume by Line: Number of claims FICO # Number of claims FICO # Number of claims FICO # Number of claims FICO # Total number of claims non-FICO Dwelling Form General Property Form RCBAP Form1 TOTALS Loss Payments by Line: Payments Payments Payments Payments Payments Dwelling Form General Property Form RCBAP Form1 TOTALS Special Allocated Expense Payments by Line: Payments Payments Payments Payments Payments Dwelling Form General Property Form RCBAP Form1 TOTALS Salvage Recovery by Line: Number of claims affected Number of claims affected Number of claims affected Number of claims affected Number of claims affected Dwelling Form General Property Form RCBAP Form1 TOTALS Subrogation Cases by Line: Number of claims affected Number of claims affected Number of claims affected Number of claims affected Number of claims affected Dwelling Form General Property Form RCBAP Form1 TOTALS Recovery Results Analysis Recoveries (year _____) Pct to payments Subrogation Gross2 Net3 Salvage Gross2 Net3 Subrogation Gross2 Net3 Salvage Gross2 Net3 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter YEAR TOTALS 1RCBAP is the Residential Condominium Building Association Policy. 2Gross is the total amount recovered. 3Net is the gross less expenses of recovery. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-19 Revised: 12/1/99 EXHIBIT 7-8a ANALYSIS OF CLAIMS BY SIZE OF CLAIM Size Building coverage Contents coverage WYO Company number of claims Total NFIP number of claims WYO Company number of claims Total NFIP number of claims $1 to $2,000 $2,001 to $5,000 $5,001 to $10,000 $10,001 to $15,000 $15,001 to $20,000 $20,001 to $50,000 $50,001 and Up Total Average Claim Cost $ $ $ $ EXHIBIT 7-8b ANALYSIS OF LOSS RESERVES Size Building coverage Contents coverage WYO Company number of claims Total NFIP number of claims WYO Company number of claims Total NFIP number of claims $1 to $2,000 $2,001 to $5,000 $5,001 to $10,000 $10,001 to $15,000 $15,001 to $20,000 $20,001 to $50,000 $50,001 and Up Total Average Claim Cost $ $ $ $ NOTE: These exhibits will be developed by the NFIP for review with the WYO Company’s Claims Manager. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-20 Revised: 12/1/99 EXHIBIT 7-9 CLAIM REVIEW SUMMARY WORKSHEET WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-21 Revised: 12/1/99 EXHIBIT 7-10 SUGGESTED LETTER WHERE PHOTOCOPY OF CLAIM PAYMENT DRAFT IS AVAILABLE Dear _____________________________________ Claim No. _________________________________ Date of Loss _______________________________ Our auditors are conducting a routine examination of our operations, one phase of which is a review of claim payments. Will you be kind enough to confirm a payment made to you? To provide you with what we believe is sufficient information, a copy of the claim payment draft is enclosed. Is the information shown on draft # ______ (as enclosed) correct? (Yes or No) Your Signature _________________________ Date _______________________ If you find the enclosed information to be accurate, please sign in the space provided above. If the information is incorrect in any way, please indicate the discrepancy on the reverse side of this letter. In either event, we would appreciate your returning this letter in the enclosed business reply envelope. Thank you for your cooperation. Very truly yours, WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-22 Revised: 12/1/99 EXHIBIT 7-11 SUGGESTED LETTER WHERE PHOTOCOPY OF CLAIM PAYMENT DRAFT IS NOT AVAILABLE Dear _____________________________________ Claim No. _________________________________ Date of Loss _______________________________ Our auditors are conducting a routine examination of our operations, one phase of which is a review of claim payments. If you find the following record to be accurate, please sign in the space provided. If this information is incorrect in any way, please indicate the discrepancy on the reverse side of this letter. In either event, we would appreciate your returning this letter to our auditors in the enclosed business reply envelope. Thank you for your cooperation. Very truly yours, Claim No. __________ Date of Loss __________ Policy No. __________ Date Claim Paid __________ Amount Paid ________________________ Name of Insured _____________________________________________________ Payment Made to ____________________________________________________ Is the information above correct? (Yes or No) Your Signature _________________________________ Date________________ WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-23 Revised: 12/1/99 C. MARKETING OPERATION REVIEW OBJECTIVES, OUTLINE, AND PROCEDURES 1. Are there written marketing plans that identify sales goals and strategies to achieve them? a. Demographic studies conducted b. Agent incentives c. Prospecting programs d. Systems in place for tracking renewals e. Marketing support f. Procedures for follow-up and closing of generated leads from advertising activities 2. To what extent has the company utilized the Cover America Program in promotion and advertising? a. Does your company promote the agent leads listing? b. Utilize the Coop Advertising Program? c. Utilize public awareness materials in mailings to non-flood policyholders? d. Implement public awareness activities for flood insurance at the local level? e. Have advertisements placed in the Yellow Pages or local newspapers? f. Use consumer magazines as a “locator” vehicle? g. Add flood insurance to all company letterhead, business cards, and other frequently distributed material? h. Have available specialty advertising items and offer them to agency force at low cost? i. Prepare brochures and other print materials for company agents that they can customize and imprint with their own address and telephone number? WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-24 Revised: 12/1/99 3. Is there a plan for providing training for company staff and agents on a regular basis? a. Does your company require that all agents attend NFIP agent workshops annually? b. Is there a staff trainer available to provide NFIP training? c. Do you include information about flood insurance in your regular agent communications? d. Do you provide for attendance for company staff at the National Flood Conference? 4. Does the company provide rating software for agents? a. Is the software updated to incorporate all NFIP Rate and Rule Changes? b. If the company does not provide its own rating software, do you provide a list to your agents of where they can obtain a software package? 5. Does the company accept credit card premium payments? 6. Does the company offer free flood zone determinations? WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-25 Revised: 12/1/99 D. CUSTOMER SERVICES OPERATION REVIEW OBJECTIVES, OUTLINE, AND PROCEDURES 1. WYO Consumer Services Evaluation Procedures a. Schedule visit with company/vendor via WYO Principal Coordinator. b. Meet with Principal Coordinator (or vendor executive) upon arrival and explain purpose of visit. c. Ask to see roster of complaints filed with carrier by insurance departments. d. Ask to see roster of complaints filed with carrier from any source about flood insurance problems. e. Request all correspondence and relevant files for review. f. Review files provided. Request explanation for all files not provided and set up arrangement to have copies sent to FEMA for review. g. Review files. Complete analysis sheet for each. h. Conduct exit interview with WYO Principal Coordinator or vendor executive. i. If review was conducted at vendor site, submit written report of findings to WYO Principal Coordinator within 5 working days of return to FEMA. j. Submit written report of findings to Edward Connor/FIA within 5 working days of return to FEMA. k. Report findings to WYO Standards Committee at next scheduled meeting. WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-26 Revised: 12/1/99 EXHIBIT 7-12 WYO CUSTOMER SERVICES EVALUATION WORKSHEET Insurance Company__________________________________________________ Vendor, if any_______________________________________________________ Name_____________________________________Policy #__________________ If Claim, Date of Loss______________________________ Yes No N/A 1. Is a log of flood-related consumer complaints maintained? ( ) ( ) ( ) 2. Upon receipt, did company/vendor acknowledge contact within 48 hours? ( ) ( ) ( ) 3. Claim Problem: ( ) ( ) ( ) Was concern involving: a. Total loss? ( ) ( ) ( ) b. Partial loss? ( ) ( ) ( ) c. Specific items of loss? ( ) ( ) ( ) d. Application of ACV? ( ) ( ) ( ) e. Did company/vendor respond promptly and in detail with its finding? ( ) ( ) ( ) f. Did company/vendor respond promptly to further inquiries? ( ) ( ) ( ) g. Was finding valid? ( ) ( ) ( ) 4. Underwriting Problem: a. Did company/vendor respond promptly and in detail with its finding? ( ) ( ) ( ) b. Did company/vendor respond promptly to further inquiries? ( ) ( ) ( ) c. Was finding valid? ( ) ( ) ( ) 5. Was some problem other than claims or underwriting involved? a. If answer is “yes,” what was the problem type?________________________ b. Was it handled properly? ( ) ( ) ( ) Comments: _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ Signature______________________________ Date of Review __________________ WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-27 Revised: 12/1/99 E. LITIGATION OPERATION REVIEW OBJECTIVES, OUTLINE, AND PROCEDURES 1. Claims Portion a. Point of Contact (POC) b. Do they have the appropriate supporting documentation: i. (MEMO) WYO Litigation Reporting Procedures, November 24, 1998 – from Jo Ann Howard, discusses guidance re: reporting procedures and bill submission. ii. (MEMO) Revision to Special Allocated Loss Adjustment Expenses – Litigation Expense Procedures, May 12, 1998. c. Check case/claim files to verify the following: i. Does the Claims Department review bills before forwarding them to FIA/NFIP? ii. Do they retain copies of all bills? iii. Do they retain initial authorization of attorney? iv. Do they maintain a list of competent local/state attorneys with NFIP knowledge? 2. Litigation/Counsel Portion a. POC in WYO’s Office of Counsel (Not the outside attorney) i. Are they tracking/controlling/reviewing all NFIP-related cases? If not, why not? Who is? (Track through that office/person.) ii. Are there cases that they did not achieve notice for? (a) They should have all cases on file. (b) Do they have the appropriate supporting documentation: (MEMO) WYO Litigation Reporting Procedures, November 24, 1998 – from Jo Ann Howard, discusses guidance re: reporting procedures and bill submission. iii. Using master list of cases for that WYO, review files for the following information: (a) Do they ensure contact/processing through the claims department and review bills before forwarding bills to FIA/NFIP? (b) Do they retain copies of all bills and correspondences? (c) Do they retain initial authorization of attorney and all future correspondences? (d) Do they maintain a list of competent local/state attorneys with NFIP knowledge? WYO Financial Control Plan Requirements and Procedures Fifth Printing Part 7 7-28 Revised: 12/1/99