Mitigation is the first and most important line of defense when it comes to disaster preparedness. Both insurance companies and consumer groups agree that one of the best ways to prevent storm damage and limit claims is to adequately harden homes before an event occurs, not after. To this end, many insurance companies offer mitigation discounts to their policyholders, providing a reduction in their premium to homeowners who add mitigation measures such as roof tie-downs and storm shutters.
Mitigation discounts have become a hot button issue in Florida. In August 2009, State Farm requested a reduction of the government mandated mitigation discount to the Florida Office of Insurance Regulation. The company argued that the discounts had become so popular that they were beginning to negatively affect the companies’ financial outlook. This request was subsequently denied by Insurance Commissioner Kevin McCarty. This battle continues today, with insurers working to ensure that the discounts they are providing are legitimate.
While there is a consensus that mitigation efforts are important and should be encouraged, there is disagreement on specific rules and guidelines in several states, including Florida. In a paper discussing property mitigation, Eli Lehrer, National Director of the Center on Finance, Insurance and Real Estate at the Heartland Institute argues that codifying mitigation discounts can lead to problems. “The value of any particular mitigation strategy depends on property location and verifiability. As a result, it is inadvisable to try and set mitigation discounts by statute.”