Citizens inspecting homes for hurricane mitigation claims fraud

TALLAHASSEE, Fla. – Oct. 26, 2009 – Florida mandates property insurance discounts for homeowners willing to fortify their homes against a hurricane. But Citizens Property Insurance Corp. says many owners have lied to cut the cost of coverage fraudulently claim hurricane mitigation discounts to cut costs.

As a result, Florida’s insurer of last resort plans to randomly inspect 500 homes to see how many owners don’t deserve the discounts, and to get a feel for the extent of the problem. About 400,000 Citizens policyholder claim some kind of hurricane mitigation discounts, for a total savings of about $700 million in wind mitigation credits.

Florida law requires the insurance discounts. Providing they actually perform the change, homeowners receive a discount off their property insurance for mitigation efforts such as storm shutters, impact-resistant windows and doors, and reinforced garage doors.

The problem, say insurers, is that it’s difficult to monitor and easy to abuse. Homeowners willing to lie to an insurance company are in little danger, so far, of being caught.

Other insurers also voice frustration with the discount credits for mitigation, and some have criticized adjustors who may have filled out forms incorrectly. The Florida Office of Insurance Regulation says companies that suspect fraud should file a complaint.

Citizens’ action, approved by its board, will cover homes and commercial policies. Each inspection will cost about $150, and the company will decide whether to expand the program or focus on a specific type of discount after it studies the results of the first phase. It has not ruled out an inspection of all homes that claim some kind of mitigation discount credit.

“This is one of the most important initiatives that Citizens has ever undertaken,” says Citizens Senior Vice President of Underwriting Paul Palumbo. “Citizens will benefit by ensuring that it has accurate information on the risk it covers. Policyholders will benefit because they will receive validated information on the storm worthiness of their home.”

Source: St. Petersburg Times, Oct. 24, 2009; Jeff Harrington.

© 2009 Florida Realtors®