Fla. Considers Standards for Home Insurers’ Mitigation Discounts

September 12, 2006

Florida home insurance companies may have to spell out standardized premium discounts homeowners would get for certain home improvements under a recommendation discussed Thursday by a state panel.

The Property and Casualty Insurance Reform Committee is trying to figure out what to do about Florida’s hurricane insurance availability and affordability crisis.

Most homeowners insurers give discounts for improvements that are likely to help avoid damages, such as hurricane shutters or roof improvements. More home “hardening” — making houses better able to withstand storms — has been hit on by Gov. Jeb Bush and other officials as a big part to solving Florida’s insurance problem.
Insurance has become unaffordable for many homeowners, with premiums more than doubling for many in the last few years as Florida has been hit by seven hurricanes and forecasters have warned the state to brace for more active seasons.

People like Leona DelMonaco, who lives in Hollywood and saw her annual premium jump from $1,733 to $5,945, say something has to be done.

“When I got the (bill) I flipped,” DelMonaco said. “Where am I going to come up with this kind of money? Somebody out there has to listen … we need help.”

Many homeowners have complained that the discounts aren’t enough, and it’s not clear what kind of a break they would actually get if they spent hundreds or thousands of dollars on improvements.

The committee was asked by Bush to try to come up with solutions. It discussed the possibility of setting industrywide standards that would tell consumers at least a range of possible percentage reductions to their bill if they make certain improvements, such as replacing their garage door with a sturdier one, or getting non-breakable glass windows.

While the panel didn’t write a recommendation with any standards for what such discounts would be, several members said consumers clearly want more information about what they might save.

“I think you’ve heard a consensus of (setting) at least a minimum that companies would give,” said Lt. Gov. Toni Jennings, the chairwoman of the panel.

But insurers say that if a standard discount is required, it has to be based on scientific evidence that improvements would reduce claims by a certain amount.

“We’re not opposed to standardization of these mitigation discounts, (but) we would caution trying to make them as actuarially sound as possible,” said Phil Lawson, president of Allstate Floridian Insurance and a member of a technical advisory group that is providing advice to the panel.

Insurers say it would be impossible to set a particular dollar amount for various improvements for every customer, because other factors would affect the person’s premium.

While some homeowners have complained that they’ve made expensive improvements but haven’t realized big savings, industry officials point out that they may have had savings but didn’t realize it — if their home stood up to a storm.

Homeowners who put up shutters may not have seen what they consider a huge savings in premium — but they may have saved by not having to pay big deductibles because their home didn’t have any damage in a hurricane, noted John Laurie, an insurance agent and member of the committee’s advisory panel.

The panel is required to have recommendations by Nov. 15. But Jennings said it will likely make proposals sooner than that because Bush is pushing it to work faster. The prospect exists to call a legislative special session before the November election to try to put changes into law if a consensus could be reached on what would be up for consideration.

“Every day that goes on is another day homeowners have to pay increased costs and he is very concerned about this,” Jennings said.
Meanwhile, Democratic legislators renewed calls Thursday for Bush to call lawmakers back into special session immediately, rather than waiting.

“This is an immediate crisis,” said state Sen. Ron Klein, D-Delray Beach, who joined Sen. Skip Campbell, D-Tamarac, at a news conference. “It doesn’t matter if there’s an election or not, (lawmakers) need to get their butts up here and serve.”

Campbell, who is running for attorney general, and Klein, who is running for Congress, accused Republicans in charge in Tallahassee of inaction. The charge was generally dismissed by Republicans as politically motivated to try to boost Democratic chances in November elections.

House Insurance Committee Chairman Dennis Ross, R-Lakeland, called the Democrats’ call “political opportunism.” Jennings said the issue was more complex than Democrats are making it out to be.
“There’s no quick fix and anyone who says there’s a quick fix is being a little disingenuous,” she said.

The task force also was discussing a proposal to make it easier for insurance companies to tap into the state’s Hurricane Catastrophe Fund when they have large numbers of claims. The fund is a backup account paid for by assessments on most types of insurance policies.

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