Mississippi House Passes Insurance Discounts for Strong Homes

The Mississippi House passed a bill Tuesday to require insurance companies to offer discounts on costly hurricane coverage in five southern counties, including three on the coast.

Discounts are required by July 2013. They would go to single-family homes and some manufactured homes for meeting strong-house standards in the current building code, those established by the Institute for Business and Home Safety or other state-approved standards.

The idea is that a roof that’s less subject to leaks, or a garage door that’s been reinforced so it won’t blow in will prevent damage during a hurricane. That means the homeowner and the insurer will see lower financial losses, and the insurer can charge lower rates.

Rep. Scott DeLano, R-Gulfport said Mississippi needs uniform standards to allow homeowners to shop for better insurance rates. Right now, the Mississippi Windstorm Underwriting Association, an insurer of last resort commonly called the wind pool, voluntarily offers price breaks on one set of standards. Some private insurers voluntarily offer breaks using other rules, while other private insurers offer no discounts at all.

The bill applies to Harrison, Hancock and Jackson counties, which touch the Gulf of Mexico, and to Pearl River and Stone counties, which are just north of the three coastal counties.

Many private companies decline to cover wind damage in areas closest to the Gulf of Mexico, forcing people to turn to the wind pool. Homeowners often pay more than $2,000 a year to insure against only wind damage on even a relatively modest home.

Mississippi is the last state along the Gulf of Mexico with no state-mandated discounts for stronger construction, although some insurers now offer them voluntarily. Programs in some other states have been plagued by problems, though.

Alabama, which requires use of the IBHS standards, has seen few people qualify for price breaks, in part because no public funds are available to help homeowners pay for work.

The Federal Emergency Management Agency has given Mississippi $23 million to help people improve their homes, with homeowners paying 25 percent and federal funds covering 75 percent. But the program has been slow to get off the ground and few people went through with work in the pilot phase.

As the program is currently set up, it explicitly avoids talking about lower insurance rates. DeLano, though, hopes the state Department of Finance and Administration and its contractor can modify the effort to line up with standards in his bill.

“We have never been able to make the connection between mitigation and homeowners’ discounts,” he said. “This bill does that.”

The bill does not set exact amounts or percentages for discounts, as most other states have done. Instead, it requires companies to file price breaks with the state Insurance Department that actuaries can justify. DeLano said that’s meant in part to avoid problems that Florida had, where the Legislature mandated discounts, only to have insurers say they were so deep that companies couldn’t collect enough money to justify writing policies.

The Florida program was also dogged by allegations that fly-by-night inspectors were certifying work that was never done or was done poorly. The Mississippi bill calls for local government building inspectors or other certified inspectors to judge the work, in part to avoid that problem.

“The goal is to make sure the insurance industry has a high degree of confidence,” DeLano said.

Insurers hand off much of their risk to other firms, called reinsurers, in an attempt to limit the financial damage they might face from a hurricane. Such reinsurers often demand very high profit margins. DeLano said he hoped stronger buildings and better inspections would get reinsurers to lower their rates, which could lead to more regular insurers offering coverage on the Mississippi coast.

House bill goes to the Senate.