By: Michael Peltier
The News Service of Florida, Sunshine State News
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 are 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."