For storm upgrade, only small savings

The state’s new hurricane mitigation program promises lower insurance rates to those who make their homes storm-proof. But nobody told insurers how much the savings had to be.

Published August 15, 2006

Ted Gembicki did exactly what state officials and the insurance industry want most Floridians do. He bought aluminum storm shutters and had the garage door reinforced on his modest Spring Hill home last month at a cost of $5,225.

Armed with photos of the work, he asked his State Farm agent for a break on his homeowner’s premium. For his efforts, his agent told him, he would get a 5- or 10-percent discount. The extra $100 wasn’t much, said Gembicki, 62, but it was something.

The check he got last week: $16.11.

“Maybe I’ll buy a pizza,’’ he said.

Gembicki’s case illustrates what could be a serious flaw in the state’s new mitigation program, which took effect Tuesday, to encourage residents to harden their homes against hurricanes.

The law, which offers matching state funds of as much as $5,000 for improvements that fortify a home, also requires insurance companies to offer incentives for such fixes. But the law doesn’t include a specific financial obligation on insurers to reduce premiums.

According to the statute, all the companies are required to do is offer homeowners “discounts, credits or other rate differentials’’.

Sometimes, that can amount to very little.

Insurance companies offer discounts for those who harden their homes in a wide range - from up to 39 percent for State Farm and 33 percent for Citizens, to just 3 percent for Nationwide.

But the discounts fluctuate dramatically depending on the age of the home, its construction, location and insured value.

At a Cabinet meeting Tuesday in Tallahassee, insurance commissioner Kevin McCarty said the percentage of the discount will be based on just the wind portion of a policy, not the total premium.

But again, that can vary. In Florida, the wind portion of a premium represents between 15 and 70 percent of the total cost, depending on location.

Gov. Jeb Bush acknowledged Tuesday the amount of a discount is a key part of the highly touted mitigation program.

“If the discount is 5 percent, I’m not interested,’’ Bush said. “If it’s 30 percent, now you’re talking.’’
Officials from State Farm Floridian and Allstate Floridian expressed support for the program at Tuesday’s Cabinet meeting.

“It’s in everyone’s best interest to do it,’’ said Joe Formusa, a State Farm vice president who also was appointed recently to the governor’s insurance technical advisory committee.

But no one could say how much of a discount policyholders will receive.

Tom Gallagher, the state’s chief financial officer who is running for governor, said each homeowner who receives an inspection report will also get a breakdown of how much will be saved on their insurance premium. That figure, Gallagher said, will be based on how much work is done.

But that leads to yet another potential problem: too many homeowners and not enough time or money. The state hopes to have 12,000 homes inspected in the next 12 weeks, and another 50,000 inspected next year.

But there are roughly 4.2-million homesteaded properties in Florida, and by noon of the program’s first day in business, the state had received more than 2,000 applications.

As part of legislation passed in May, the state set aside about $250-million to fund the matching grants program over a three-year period. Bush, who leaves office in January, said state statutes should be changed to allow the program to continue beyond 2008.

While it remains to be seen how much the state will have to spend on matching grants, some homeowners say they already know not to expect much from their insurance company.

Roberta and Fred Hosken spent nearly $300,000 earlier this year to hurricane-proof their Largo home, which has an estimated value of more than $2-million, according to the Pinellas County Property Appraiser’s Web site.

Looking to save on their nearly $12,000-a-year property insurance bill, they hand-delivered the receipts to their Nationwide agent.

The discount they got on their $300,000 improvement: $400.

“We asked them what more we could’ve done,’’ Roberta Hosken said. “It just didn’t matter.’’

But that wasn’t the worst cut.

The couple got a letter two weeks ago telling them that as of Nov. 10, Nationwide was dropping their homeowners policy.

“And they asked us,’’ Hosken said with a chuckle, “to please consider them for our car insurance.’’

Tom Zucco can be reached at zucco@sptimes.com or (727) 893-8247.