Insurers giving second look to windstorm mitigation discounts
Due to widespread property inspection fraud, insurance companies are starting to reinspect homes that have received favorable marks for hurricane protection, said Sam Miller, executive vice president of the Florida Insurance Council, Inc. in Tallahassee. Miller said insurers are selecting homes at random or those with signs of incomplete inspection reports to ensure properties with windstorm mitigation discounts do in fact qualify for insurance premium savings.
“Insurers are responding to concerns that were expressed during (public) hearings that there’s an awful lot of fraud and incompetence on the parts of inspectors in some reports,” Miller said.
Bozzetti estimates he saves $1,360 a year on his property insurance premium because of hurricane impact windows and a hurricane impact garage door he installed on his home in order to get a windstorm mitigation discount.
Bozzetti said he has no reason to believe his home wouldn’t pass a reinspection but is concerned about language in a bill before the House of Representatives that could make property owners financially responsible if a discount was wrongly issued.
House Bill 1447 states if a premium discount was falsified, policyholders must pay the difference retroactive to when the discount was applied. The act will take effect Oct. 1 if passed during this legislative session.
“I would suspect if any mistakes were made (the inspectors) should be responsible, not the homeowners,” Bozzetti said.
The Legislature this session is attempting to tackle fraud issues with the windstorm mitigation discounts along with several other flaws found with windstorm mitigation discounts.
The Legislature is taking up the issues after the Florida Commission on Hurricane Loss Projection Methodology presented Gov. Charlie Crist in February with a 39-page report on concerns and recommendations for improvements in the discount program. Problems listed in the report include the process used to evaluate home strengthening improvements, the rate making process and inspection fraud.
One of the major problems outlined in the report includes a lack of checks and balances in the residential inspection systems.
The commission found some home inspectors were advertising free services if the inspection didn’t result in a discount, providing deals for non-related services to attract businesses or conducting phone interviews and drive-by assessments to inspect properties.
“If an inspector did a very thorough job and spent a lot of time in house on the inspection you’re probably OK,” Miller said.
A drive-by or phone inspection, however, could be a red flag for an insurer to assign a reinspection.
While the Florida Commission on Hurricane Loss Projection Methodology proposed several recommendations for improving the way in which discounts are assessed and applied, Dr. Randy E. Dumm, chair of the commission, said the House and Senate are addressing concerns in bits and pieces by amending existing statutes.
“At this point in time, there’s a lot of things going on in the insurance market so this is not front and center at this time,” Dumm said.
One issue that will not be addressed this session is the rate-making process. The commission’s report states the current system in which the weakest structure is used as the base for determining credits is resulting in large discounts for stronger structures. The commission proposes using an average structure, a move that could result in lower discounts for homeowners.
Bradenton resident Bob Yavis said he hopes his annual windstorm mitigation savings of a $1,000 doesn’t decrease as a result of changes to the discounts.
“It certainly wouldn’t make me happy,” Yavis said. “When you figure the savings is about a third of the premium, that’s a nice bunch of change.”