5/21/2012
By: Michael Peltier
The News Service of Florida, DeSoto Sun Herald
TALLAHASSEE (News Service of
Florida) — 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.
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.
She said Citizens could do a
better job of letting homeowners know what inspectors
are looking for.
“In some cases, you are
looking at pretty hefty increases,” Westcott said. “That
is really a big part of our concern.”