I've been researching this and haven't found the answer for this specific scenario:

Customer had maintained flood coverage, since 2008, for property located in Zone B. Zone changed in 2011 to Zone AE and every policy since then continued to show zone B. The credit file shows that we repeatedly contacted the customer and insurance company from 2011 to current to try and get that zone updated. This is not an escrowed policy. Other than demand the loan, what can we do to get this corrected? Is the customer the only one that can direct the insurance company to change that zone/increase premiums or does the bank have the right to do that?

First, I would check to see if the policy is grandfathered. If it isn't, force-place ASAP. This will still be a violation as you didn't have appropriate insurance for 4 years, but it should correct it going forward.

We actually have this situation on one loan now as well. Look to the Flood Q and As and question 71. The last paragraph of that answer says:

[i]If, despite these efforts, the discrepancy is not resolved, or in the course of attempting to resolve a discrepancy, a borrower or an insurance company or its agent is uncooperative in assisting a lender in this attempt, the lender should notify the insurance agent about the insurer’s duty pursuant to FEMA’s letter of April 16, 2008 (W–08021), to write a flood insurance policy that covers the most hazardous flood zone. When providing this notification, the lender should include its zone information and it should also notify the insurance company itself. The lender should substantiate these communications in its loan file.

Also see question 72:

As noted in question and answer 71 above, lenders should have a process in place to identify and resolve flood zone discrepancies. A lender is in the best position to coordinate between the various parties involved in a mortgage loan transaction to resolve any flood zone discrepancy. If a lender is able to substantiate in its loan file a bona fide effort to resolve a discrepancy, either by finding a legitimate reason for such discrepancy or by attempting to resolve the discrepancy, for example, by contacting FEMA to review the determination, no violation will be cited. If a pattern or practice of unresolved discrepancies is found in a lender’s loan portfolio due to a lack of effort on the lender’s part to resolve such discrepancies, the Agencies may cite the lender for a violation of the mandatory purchase requirements.

We documented the file to show our efforts and the resistance we faced from the insurance agent. Each year this comes up for renewal we send them notification once again and document the file each time.

Thank you

Read this thread also:

http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=2028544#Post2028544

Thank you Randy. That is very useful info to have.