Last Thursday, October 1, I was driving around when a new report on WLRN peaked my interest.  The report said that the state was going to allow the raising of insurance premiums again for homeowner’s policies. 

I was wondering how this could happen, after all, we haven’t had a hurricane in 4 years.  Those insurance companies must be raking in the profits - 4 years of not having to pay out on any losses, 4 years of not having to send out any insurance adjusters, 4 years of sitting around on a pile of cash.  “Hum, how could this happen?” I asked myself.   The report added that one of the reasons was that the insurance companies were losing too much money on the wind mitigation credits - they were not getting enough money from premiums.

So I decided to do some research on the issue.   I came across a couple of articles on the internet that talks to the issue and can actually give us more detail on this issue.  The Florida Commission on Hurricane Loss Projection Methodology Windstorm Mitigation Committee Hearing Report of September 17 states that some counties are actually paying too little while others are paying too much.  But then the report adds:

Florida Association of Insurance Agents Executive Vice President Scott Johnson provided testimony relating to agent issues.  After his presentation, there was significant discussion regarding inspection fraud and that some agents may passively allow fraud to occur.  Mr. Johnson recommended that policies should be adopted to give a policyholder "skin in the game" regarding verification of premium reductions.  Dr. Nicholson noted that the system is "sick" and that there should be laws against tying financial incentives to wind inspections. Agents should not have business relationships with inspectors.

There is an interesting article by Scott S. Koedel, CPA, president and COO of Don Meyler Inspections, Ensuring the accuracy of windstorm mitigation credits, where he argues:

As awareness of the windstorm mitigation inspection has increased, so has the sheer quantity of inspectors performing inspections, which now number in the thousands. This rapid growth has resulted in a widely varying level of quality control processes among inspection companies. While one company may subject its inspection data and supporting digital photos to hundreds of date validationchecks and submit them to a quality control department run by a professional engineer, another may the inspection results on a paper form and leave it behind with the homeowner.

And he continues:

Unfortunately, fraud has become a topic of concern. Underwriters have reported numerous instances of inspectors not entering policyholders' homes or attics, an obvious prerequisite for a proper windstorm mitigation inspection. In the most examples of impropriety, doctoring of the mitigation inspection form has occurred.

In the article, he continues with what steps could be taken to rein in the inspectors.

So apparently, the problem is not the issue of the wind credits, but the fraud that is occurring with the inspections.  Are steps taken by homeowners to mitigate wind damage during a hurricane worth the credits on the premiums?

If we go back to the September 17 report:

Applied Research Associates Chief Technical Officer Larry Twisdale continued his presentation on a loss relativity study from the previous Committee meeting. The study indicated that a well-mitigated building will reduce loss by 40-60 percent.

In conclusion, residents of the state should demand that inspectors should hold a special license and only the person actually doing the inspections can sign and file the form.  No leaving behind any forms to the homeowners.  And, then we can get reductions in our premiums again.

Maria Luisa Castellanos, R.A., LEED AP
President
United Architects, Inc.

This blog was originally published in the United Architects, Inc., Blog