Mitigation and Premium Discounts

 

In the wake of Hurricane Andrew, the Legislature decided that consumers needed more detailed disclosures regarding their property insurance premiums.  Beginning in 1997, insurers were required to separate residential property insurance premiums into two components: rates for hurricane coverage and rates for all other coverages.

 

As noted earlier, homes built under the new stronger building codes withstand the impacts of hurricane force winds much better than those constructed under the state’s older code – resulting in fewer and lower claims due to wind damage.   One of the fundamental concepts of insurance is that the premium the policyholder pays should relate to the level of risk being insured. 

 

In 2002, the Florida legislature codified that concept into law.  It mandated that all windstorm policies provide premium discounts -- on the wind storm component of the premium -- if the insured property complies with the new stronger building codes.   All properties built in Florida after 2001 (1994 in Miami-Dade or Broward counties) qualify for premium discounts.  In addition, older structures that have been inspected and judged to meet the new codes’ structural requirements are eligible for premium discounts.   In most cases, owners of older structures will need to document the property’s eligibility for the discount.  

 

Unfortunately few homeowners were aware of the premium discounts and therefore few retrofitted their properties to take advantage of the cost savings. Beginning in 2005, all carriers offering windstorm coverage in Florida were required to notify their windstorm policy holders of the availability of possible premium discounts, credits or rate reductions.  Most insurers simply notified their policy holder of a range of possible discounts based on average conditions throughout the state. The Office of Insurance Regulation decided that this notification was too vague to be useful to policy holders.  

 

As of 2007, all carriers must now notify each policy holder of specific discounts available to that policy holder based on the insured property’s age, location, structure design and building techniques, using a standardized form developed by the Office of Insurance Regulation (OIR-B1-1655).  http://www.floir.com/pdf/OIR-B1-1655.pdf    Different carriers may offer different premium discounts, and impose different methods to qualify for those discounts.  Some carriers may refund premiums for the current coverage period upon proof of completed mitigation efforts; other carriers may simply reduce future premium payments upon policy renewal.  Agents should be aware of the discounts and procedures of the insurers that they represent. 

 

The following illustration represents Form OIR-B1-1655 with discounts available on Citizen Property Insurance policies — discounts offered by other companies may be different.

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In 2007, the legislature mandated a “uniform mitigation verification” form that policyholders could file with insurers for the purpose of “factoring discounts for wind insurance.”  This standardized form (OIR- B1-1802 )  http://www.floir.com/pdf/OIR-B1-1802.pdf   is completed and signed by an approved My Safe Florida Home wind certified entity (WCE) or other person conducting the inspection.  The homeowner then submits the verification form to the homeowner’s windstorm carrier.  The carrier will review this form and determine the premium discounts the policy holder is entitled to, based on the policy rates the company has filed with the Office of Insurance Regulation.  Insurers must accept valid a uniform mitigation verification form certified by the Department of Financial Services (through its free mitigation inspection program) or forms signed by:

 

¨ A hurricane mitigation inspector employed by an approved My Safe Florida Home wind certification entity (WCE);

¨ A certified building code inspector;

¨ A licensed general or residential contractor;

¨ A licensed professional engineer who has passed Building Code Training Program; or

¨ A licensed professional architect.

 

Completed inspection reports remain valid for insurance purposes for a five-year period.

 

 

Shutter Requirement for Continued Coverage

 

Effective January 1, 2009, Citizens Property Insurance Company will no longer insure high-value homes in the wind-borne debris region unless those homes have opening protections (e.g. shutters, impact resistant glazing, etc.). To be covered by Citizens, a residential structure with an insured value of $750,000 or more that is located in the wind-borne debris region must have opening protections on all openings -- and those protective measures must comply with the Florida Building Code at the time they were installed.   

 

Citizens will not issue new policies to such properties after January 1, 2009, unless they comply with the opening protection requirement.  Existing Citizens’ policies have an additional six months to comply.  Letters of notification were sent to of existing policy holders on January 1, 2009, giving them six months to verify compliance with the new requirement.  Non-renewals of existing policies will begin on June 30, 2009, unless the property is in compliance at that time. 

 

If the coverage value of a currently-insured property in a wind-borne debris area increases above $750,000 -- for example, due to remodeling or an addition -- then that policy becomes subject to these requirements. Citizens will notify such insureds of the opening protection requirement by letter 90 days after renewal. If Citizens does not receive verification of adequate opening protections within 90 days of that letter, the insured will receive a non-renewal notice, which will give the insured six more months to meet this new requirement.   

 

Please note that only homes with “Hurricane” rated openings are eligible for continued Citizen’s coverage in Miami-Dade and Broward counties.  Citizens will accept other types of opening protections for homes located in elsewhere in the wind-borne debris region.  

 

Opening Protections:		Eligible for Citizen’s coverage in
		Miami-Dade and Broward counties	in rest of Florida
“Hurricane” rated	All exterior openings areprotected by protections rated “Hurricane”	yes	yes
“Glaze” rated	All glazed openings are protected by glass rated “glaze”	no	yes
“Basic” rated	All glazed openings are protected by glass rated “basic”	no	yes
Wood Panels	All exterior openings are protected by plywood or OSB that meets 2004 Florida Building Code standards	no	yes
Not Rated	Exterior protections were manufactured prior to 1994 or wood panels do not meet FBC standards	no	no
No opening protections		no	no

 

Although this new requirement applies only to state-administered Citizens’ policies on high-value homes located in wind-borne debris areas – other private windstorm carriers will most likely adopt similar requirements in their policy language.