Florida windstorm insurance mitigation needs repair
Peter Nehr, guest columnist
In Print: Wednesday, November 4, 2009
It is my belief, and the belief of many of my fellow representatives, that if homeowners spend money protecting their homes against hurricanes and the improvements they made reduce their risk of loss, they should get a discount on their insurance premium. Who can argue with that? It makes sense and it should be available to all homeowners.
Providing windstorm mitigation credits to Florida homeowners who protect their homes is good public policy. It is an incentive to put up storm shutters, install proper garage doors and windows, and ensure roofs are tied down properly. Mitigation helps to lower insurance premiums and will limit the state’s financial exposure to future hurricane losses.
The problem is that this well-meaning program isn’t working the way the Florida Legislature intended it to work. In fact, Insurance Commissioner Kevin McCarty recently acknowledged that problems with the mitigation credits could be the reason why several of the state’s private property insurers are struggling.
In my opinion, it is time for the state Office of Insurance Regulation to take another, and hopefully this time a closer, look at how windstorm mitigation discounts are awarded and make some urgently needed changes to the system. If the Office of Insurance Regulation cannot fix the problems, the Legislature needs to take some corrective action during our upcoming session.
The problem is pretty straightforward. A small cottage industry of private mitigation inspectors, many with questionable credentials, has recently proliferated in our state. These inspectors tell homeowners that for a fee, typically $150, they will guarantee a premium reduction of at least that amount, “without having to drive a single nail into your home.”
In other words, the state’s well-intended home mitigation program is turning into a fraudulent insurance giveaway program allowing some residents to receive premium credits far too large for the actual risk reduction to their homes, at the expense of increasing premiums to other homeowners who are being honest and fair. I am sure you will agree that dishonesty and fraud should not be rewarded.
Another reason this should disturb all of us is that because of flawed inspections, many citizens are now living with a false sense of security that they are properly protected against hurricanes. The result is that a homeowner could be in personal danger if he, she or the family tries to ride out a major storm that tears apart their home.
Currently, the Florida Commission on Hurricane Loss Projection Methodology is holding public hearings on our current mitigation program. It is required to make recommendations to the Legislature by Feb. 1.
It appears some media outlets have mischaracterized this issue as property insurers reneging on promises they made to policyholders. That is not necessarily true. Insurers have for many years supported mitigation efforts and given discounts, as long as the mitigation was appropriate and honest.
On Sept. 15, McCarty actually told the governor and Cabinet that there are problems with many of the home inspections and mitigation credits. He suggested legislators should review the program and toughen fraud provisions. Due to his report, there is currently action being taken where spot checks will be done by Citizens Insurance to verify that mitigation credits given were deserved, based on the work actually performed. If enough fraud is found, a full-fledged investigation may be needed.
The Legislature got it right seven years ago. Insurers should provide discounts to people who truly take appropriate measures to protect their homes from hurricane damage. Nearly everyone with a stake in the program wants it to be successful.
The bottom line for all of us is that the system needs repair. Commissioner McCarty needs to conduct a proper investigation and should fix any problems uncovered. If he does not, then the Legislature may need to take action. It’s time to make sure mitigation credits truly match the reduction of risk. It is time to weed out the bad apples preying on our system with bogus inspections that may be leaving many homeowners feeling safer than they really are, and putting our citizens not only in physical danger, but also possible financial danger.
This should be a nonpartisan issue and I urge all of my fellow legislators, the Cabinet, the insurers and the governor to work together and come up with a win-win solution for our citizens. They deserve nothing less.
Peter Nehr of Tarpon Springs represents District 48, which consists of North Pinellas County and some of Pasco County, in the Florida House of Representatives. He can be reached at (727) 943-4880.