Spectre of fraud haunts FL property market

Among the myriad problems the Florida homeowners market suffers: fraud-like behavior. (Via RiskMarketNews on twitter) Sayeth the Palm Beach Post:

The state requires insurers to issue discounts if a property is solidly built – credit for having hurricane shutters or specially installed straps to hold a roof in place. Only problem – most properties that get the credit don’t deserve it, based on inspections by Citizens Property, the state-run market leader:

Since the company started reinspecting with an eye toward catching deception, 65 percent of single-family homes have lost credits. Among commercial properties, 53 percent inspected were found to have discounts they didn’t deserve.

Other insurers are stepping up inspections. This isn’t too big a surprise – here’s a slide that Locke Burke, chairman and president of Security First, dropped at the CAS Spring Meeting last month:

The average reinspected home had been paying about $165 less than they should have. The average older home (pre-95) was underpaying by more than $300.

Hard to blame the property owners here, as they are only hiring inspectors, not submitting results. However there’s a contractor problem here. The Palm Beach Post notes:

Among the abuses noted by the state Office of Insurance Regulation were unqualified or unregulated inspectors, vague forms and a lack of documentation proving homeowners took the measures they said they had taken to harden their homes.

And it’s a shame. I support the credits. Construction makes a huge difference in being able to withstand a hurricane. I think every home in Florida should be retrofitted and inspected by a private-public consortium.

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