Discounts, or no deal for insurers
A few years ago, Florida lawmakers offered a fairly sweet deal to the state’s property and casualty insurers. The state would take on more of the risk for catastrophic storms, and provide financial support for a program that encouraged homeowners to "harden" their properties against storm risks by installing shutters, fixing roofs and taking other measures to reduce insurance companies’ losses.
When they passed the 2007 law, legislators expected the average price of insurance to decline statewide, and anticipated double savings from the My Safe Florida Home program, which provided subsidies for storm-proofing efforts. Homeowners who took advantage of the grants (or paid for their own improvements) also could expect a significant discount on their property insurance tied to specific improvements like storm windows. Those discounts were first mandated in a 2003 law, and increased dramatically in late 2006.
Now insurance companies — led by lame-duck State Farm, who will be deserting the state’s property-insurance market entirely within the next three years — are petitioning to get rid of some of their discounts, saying they’re too expensive and not backed by reliable data. Insurance Commissioner Kevin McCarty said no, for now, to State Farm’s request to drop discounts for stormproofing homes — but the insurance giant received permission last week to take back other discounts, which could result in rate increases averaging about 28 percent statewide. Among the discounts that could be lost: Price breaks for multiple-policyholders and rate cuts for those who don’t make claims.
Consumer advocates fear it’s just the first blow. This week, the state began reviewing the storm-mitigation discounts for all policyholders, and might reduce mandatory discounts for improvements designed to help buildings weather storms. The Florida Commission on Hurricane Loss Projection Methodology will be considering several factors — including whether insurance companies will be allowed to penalize property owners who don’t take specific steps to secure their homes against damage. And the panel could be rolling back discounts that save coastal residents as much as 50 percent on their homeowners’ insurance.
But if the commission is going to allow insurance companies to take back discounts, or to penalize homeowners who can’t afford to make improvements to their homes, they also should consider reducing support for the programs that lower insurance companies’ cost of doing business in Florida — including reducing the companies’ reliance on state-backed catastrophic funding during the next major storm.