5/21/2012
By: Michael Peltier
The News Service of Florida, Pensacola News Journal
TALLAHASSEE
— Following up on calls to raise premiums to match risk,
Florida’s state-backed property insurer is taking a
second look at wind mitigation incentives put in place a
decade ago.
For many of its customers, that means higher rates.
Citizens Property Insurance Corp. plans to take a look
at 209,000 residential policies by the end of the year
to see if granted wind mitigation credits are warranted.
The incentives, which include such things as tie downs,
shutters and other upgrades, were offered beginning in
2002 in an attempt to lower risk for the state-backed
pool, which now handles nearly 1.5 million policies.
As of April 30, the last date for which detailed
information is available, Citizens inspectors have
completed 180,503 residential inspections, finding that
in some cases hurricane hardening measures weren’t in
place, resulting in premium increases totaling $107
million. Nearly 71 percent of homes inspected have seen
premiums rise.
The program has also resulted in premium decreases on
7.5 percent of policies, for a total reduction of $4.4
million.
For those homeowners seeing higher rates, premiums have
jumped an average of $600 a year, or 23 percent.
Some residents in Escambia and Santa Rosa counties are
expected to see rates nearly double.
The wind mitigation program has increasingly come under
fire from industry groups and Office of Insurance
Regulation officials, who have said the program has
eroded the company’s premium base while not
significantly reducing its exposure, especially after
credits were dramatically increased in 2007.
Private insurers have also given mitigation credits. A
2010 study by the Department of Financial Services found
that despite good intentions, the programs were costing
companies in terms of lost premiums while having only a
modest decrease in potential losses.
“At present, the wind mitigation credits not operating
as intended, and according to (Risk Management
Solutions) analysis, are a significant contributing
factor to the reported premium degradation,” the study
said.
Among its chief criticisms, the report noted that some
homeowners were receiving double credits for fixtures
that were already incorporated into the underlying
premium. Insurers were also restricted from adjusting
base rates to reflect structural issues, which the
report said hobbled the industry.
“If the (credit) system continues in the absence of a
base rate offset, the average premium reductions could
ultimately reach 35 percent, which would clearly have an
impact on insurance revenues,” the report concluded.
Lawmakers responded months later by passing SB 2044,
which was vetoed by Gov. Charlie Crist.
Last year, lawmakers passed and Gov. Rick Scott signed
SB 408, which struck some language relating to
mitigation credits and gave insurers more flexibility in
establishing rates and applying discounts.
Citizens officials have ordered re-inspections of homes
that have claimed more than $650 in credits.
Robin Westcott, Florida Insurance Consumer Advocate,
said she understands Citizens’ objective to get accurate
information on proper wind mitigation credits, but is
worried homeowners may not always be ready with proper
documentation on their mitigation efforts and may
unnecessarily lose out on benefits.