That is not to say that the industry doesn't have some stake when it comes to educating policyholders. The more consumers concentrate on upgrading their homes, the less money carriers have to pay out in damages. That is why insurers offer premium discounts for homeowners who install shutters or use stronger materials when constructing a home.

“Mitigation is incredibly important,” said Sam Miller, executive vice president of the Florida Insurance Council (FIC). “It will have a significant effect on helping to reduce rates.”

Forms and Rates

Insurers have been offering discounts for years and with each property bill, they have become more defined at higher and higher levels, especially when it comes to the wind-risk portion of a homeowners' premiums. The discounts take into account everything from the age of the house, the type of roof, and other enhanced building techniques, such as installing shutters or shatterproof glass. However, given the complexity of a homeowner's policy, many homeowners are unaware of how they can qualify for these discounts and the amount of money they could save.

The Financial Services Commission (FSC) recently approved a plan to help resolve this situation and better inform consumers about their rights and options.

Proposed by the Office of Insurance Regulation, the commission gave the green light to two rules that had their genesis in this year's property bill. One rule creates a form that is drafted so that consumers can easily understand hurricane discounts they are eligible for and how these discounts will impact their premiums. The impact of the rule is expected to be twofold: on one hand, it will point out to consumers receiving premium discounts that they are in fact paying less money, while on the other,, the hope is that more homeowners will move to reinforce their homes when they see how much money they could be saving.

Discounts Add Up

For example, policyholders in Citizens could receive up to a 43 percent premium credit on its hurricane coverage if their home was built before 2001 and complies with the state building code. Other possible credits include a 23 percent discount for having a hip-shaped roof and up to 33 percent for shutters. If you are an Allstate Floridian policyholder, you could get about a 12 percent discount on the wind portion of your premium if you have shutters and your home was built by 2002.

While the new form is aimed at assisting consumers as they evaluate their coverage needs and financial responsibility, consumers are also supported by the industry since the forms hold the possibility of reducing losses. Given the $36 billion in losses from the 2004 and 2005 hurricane season, carriers are actively pursuing any means to hold down their exposure. “We're on board with the new rule as long as rates are still adequate to meet our needs,” said Ryan Priest, spokesperson for Allstate Floridian. “But obviously with the new rule, some of our customers will enjoy a savings on their hurricane premiums.”

State Farm spokesman Chris Neal called the new rule “good public policy,” which will go a long way to strengthen homes and prevent damage. But Neal adds that policyholders should consider the discounts as a way to mitigate their homes, and not just as a means to pay lower premiums. “The insurance problem is so complicated, but this is one [piece] in the puzzle,” he said. “We can't keep doing what we are doing.”

Under the rule, the policyholder mitigation forms were initially scheduled to take effect sometime after the rule is formally adopted this year. The industry, however, argued that carriers needed more time to make the administrative changes needed to fully implement the forms. The commission agreed and delayed the full implementation of the rule until March 1, 2007.

Discounts Increase

If the industry is on board for the policyholder discount forms, it is far from supporting a second rule that spells out the suggested discount levels. Currently, the discounts are spelled out in a 2002 Department of Community Affairs' (DCA) study, which incorporated the findings from two research studies entitled the Development of Loss Relativities for Wind Resistive Features of Residential Structures, and Development of Loss Relatives for Wind-Resistive Features of Residential Structures of Five or More Units.

Until now, the suggested level of hurricane mitigation discounts offered by residential insurers was 50 percent of those contained in the DCA study. One reason for the 50 percent level is that when the studies were conducted in 2002, regulators viewed the data, developed by computer models to calculate the discounts as suspicious. Since then, however, the state has developed its own public computer model, and that, along with other information, has lead to the currently proposed rule. Under the rule, the discounts are increased to a suggested level of 100 percent, which may be lowered by a carrier if they can prove that lower discounts are justified. The rule takes effect on January 1, 2007, which has many crying foul.

FIC President Guy Marvin submitted a letter on behalf of all the major trade groups to the FSC pointing out that the rule gave the industry inadequate time to evaluate the discount issue. “While the state makes it clear that the OIR-determined discounts are simple guidelines stating they 'may' be used by insurers, the rule does not provide any realistic alternative,” he wrote. “An insurer may use its own discounts only if 'they are supported by detailed alternative studies where all assumptions are available to the OIR for review.' This would appear to impose a new requirement on already-approved rate plans that OIR has already determined are actuarially justified. It will probably be impossible for any insurer to meet these new requirements by the January 1, deadline.”

Going Public

Despite struggles over forms, rates, and discounts, there is a concentrated effort by policymakers to get the word out to policyholders about the choices they have and the resources available. Gallagher recently announced that 2,200 homeowners who applied through the My Safe Florida Home program would receive free home inspections. The homeowners are located in Palm Beach, St. Lucie, and Indian River counties.

Lawmakers earmarked $250 million to the program to help Florida homeowners become aware of the need for making improvements to reduce damage from a hurricane. Following an inspection, homeowners receive a report outlining seven areas that could be improved, an estimate of how much it would cost, and the potential insurance savings it could generate. Some homeowners might also qualify for a matching grant of up to $5,000 if they chose to upgrade the homes.

“Before this hurricane season ends, my goals are to provide 12,000 free home inspections to help Floridians strengthen their homes and better protect their families against a catastrophic storm,” Gallagher said.