Plan to harden homes lags

The aim of the My Safe Florida Home plan was storm-resistant homes

and lower insurance rates. So far, it has brought neither.

Article Courtesy of The St. Petersburg Times

Published  January 17, 2007

It has been touted as an antidote to the rising costs of Florida's property insurance.

Through a program called My Safe Florida Home, the state wants to help homeowners strengthen their dwellings against hurricanes. Though expensive, it would be worth it if it substantially reduces insurance premiums.

"If the discount is 5 percent, I'm not interested. If it's 30 percent, now you're talking," former Gov. Jeb Bush said when the Cabinet discussed the program's benefits last summer.

But eight months after the state approved $250-million for the program and the federal government added $100-million, talk of insurance discounts has all but evaporated.

Now lawmakers meeting in a special session on insurance are considering expanding the My Safe Florida Home program.

But a look back reveals troubles that arose because the Legislature wanted to design and implement a program for which there was no template - and legislators wanted to do it fast.

In designing it, they failed to consider some of the state's neediest citizens. Thousands of low-income homeowners were excluded because of a requirement that participants have property insurance.

In implementing it, they handed responsibility to the Department of Financial Services.

The department turned to FLASH - the Federal Alliance for Safe Homes - a nonprofit organization that educates and trains the public about disaster protection.

The state awarded FLASH a $459,400 contract to run part of the program's pilot phase. Without giving others a chance to bid, the state then revised the contract four times, ultimately paying FLASH almost $3-million.

Under the program, the state provides free home inspections to identify work needed to shore up dwellings against hurricanes. The state provides matching grants of as much as $5,000 to help homeowners make the improvements.

In theory, fewer homes would be lost to storms. Insurance companies would benefit because they wouldn't have as many claims to pay, which should result in lower premiums.

FLASH trained 1,600 home inspectors and contractors and inspected about 14,000 homes. It also developed curriculum for the state to train more inspectors and contractors.

But to date, the state has not given any Floridian a grant. In fact, the results of the first completed inspections are only now being sent to homeowners to learn what improvements, if any, they should do.

And those who end up having a more secure roof, window shutters and hurricane rated garage doors should not expect significantly cheaper insurance.

FLASH's president, Leslie Chapman-Henderson, says the program was designed to protect homeowners from hurricanes, not to give consumers a break on their insurance.

"In people's minds that read the paper, they're thinking, 'My Safe Florida Home is how I get a discount.' You might, you might not," she said.

And insurers say that even without discounts, the program is worthwhile because it protects families and their homes.

The diminished focus on discounts is a familiar and aggravating tale to Rodney Fischer, head of the Pinellas County Construction Licensing Board. He says that for years, the insurance industry has pushed promises of insurance discounts for stronger homes - with minimal benefit for consumers.

"Basically what the insurance industry wants is no losses," said Fischer, a former head of the Contractors and Builders Association of Pinellas County. "Ultimately you've got a safer house. That's not to be minimized.

"But by the same token, if you're going through that kind of effort, shouldn't there be some sort of lesser insurance rate?"

* * *

The state created My Safe Florida Home last spring. State-provided inspectors conduct free home inspections and review seven issues: the roof deck attachment; secondary water barrier; roof covering; brace gable ends; reinforced roof-to-wall connections; opening protection; and exterior doors, including garage doors.

To qualify, the home must be a homesteaded property with an insured value of less than $500,000.

Rather than solicit bids to run the initial phase of the program, the Department of Financial Services posted an advertisement last July 10 that it intended to hire FLASH for a contract "not to exceed an amount of $457,000."

The advertisement stated that FLASH "is uniquely situated to conduct the pilot program, and is the only entity capable of conducting the needed pilot program within the very expedited time constraints."

The ad gave others the opportunity to submit an application within 72 hours of the posting.

Nobody else applied.

On July 18, the department entered the agreement with FLASH and signed a contract for $459,400.

At the time, the head of the department, former Chief Financial Officer Tom Gallagher, was running for governor.

In the middle of another hurricane season, Floridians were clamoring for protection against hurricanes and relief from rising property insurance costs. They looked to My Safe Florida Home for help.

But computer problems in the system to receive applications for home inspections hampered Gallagher's department from getting the program going as fast as hoped.

On Aug. 15, Gallagher announced a goal of 12,000 home inspections by the end of hurricane season Nov. 30.

The department expected that 2,000 low-income homeowners would be included among the 12,000. But the state failed to foresee that many low-income homeowners don't have property insurance because they can't afford it.

The My Safe Florida Home legislation required that home owners have current property insurance.

The state now says it hopes federal dollars can be used to address getting uninsured homeowners into the program. Last week, the program also began inspecting low-income homes for owners who do carry insurance.

Three days after Gallagher announced his goal, the Department of Financial Services made its first revision to FLASH's agreement, raising the original contract from $459,400 to $1,946,050. The number of inspections FLASH became responsible for rose from 1,000 to 8,000.

Over four months, the state revised its contract with FLASH a total of four times. The final contract called for 14,000 completed inspections and 400 reinspections. The value of the contract: $2.9-million.

The state never advertised or competitively bid the contract as it grew in value from $459,400 to nearly $3-million.

Chapman-Henderson said $2.1-million of the $3-million contract covered the cost of home inspections and did not benefit her organization.

That single contract was $300,000 more than the total of all state contracts it received in the prior six years.

Rick Mahler, Gallagher's chief of staff, said no other company stated interest in the project when the state posted notice that it intended to hire FLASH.

"No one lifted a finger to say, 'We could do any of this,' " Mahler said.

As for the exponential increases in FLASH's contract, Mahler said the department needed a larger sampling than the 1,000 home inspections called for by the original contract to ensure that they had an efficient inspection process.

"We realized that's not going to be enough of a volume to have a test," Mahler said of the original contract for the pilot program.

Rep. Dennis Ross, the former chairman of the House insurance committee, said he was unaware of how the contract was awarded and escalated.

He said he will ask questions about the FLASH contract during this week's special legislative session on insurance.

"I would be very interested in finding out what happened and why it went so high," he said.

* * *

Chapman-Henderson said no other organization in America had the expertise to fulfill the state contract as well and under the expedited time frame.

"Tell me: Who could have done this at this cost with this tremendous outcome?" Chapman-Henderson said.

She said the state wanted to own the results of her organization's work, including a training manual and video, which some for-profit organizations would have wanted to copyright for themselves.

Bob Stroh, executive director of the Schimberg Center at the University of Florida, said the university could have handled the work performed by FLASH, though not in the time frame established by the state because of the bureaucracy involved in higher education institutions.

But he said other companies could have done the work.

"I can't imagine they're unique," Stroh said. "I get the feeling this was the person in the right place at the right time."

Stroh said firms such as Steven Winter Associates could have handled the project. Michael Crosbie, a spokesman there, said the company has "been doing a lot of work in Florida on hurricane mitigation" and could have managed the pilot program.

* * *

Bill Newton, executive director of the Florida Consumer Action Network, said he and other nonprofit consumer groups want lawmakers to ask questions to make sure that the My Safe Florida Home program results in real benefits for Floridians.

"Is this program just to add to the profits of the insurance companies?" Newton said. "It's going to cost a bundle, so we want to make sure the program is really effective."

If by hardening homes the program ultimately reduces exposure for insurance companies, Newton and Fischer say, shouldn't insurance rate reductions be required?

Not according to the insurance industry and state regulators.

"While discounts are important, we do not think they are the reason people should be retrofitting their homes," said Bob Lotane, a spokesman for the state Office of Insurance Regulation.

Lotane said making homes safer will lead in the long-term to better discounts.

"The discounts are going to get better," Lotane said. "Where we are now with these discounts is not where we'll be."

Justin Glover, a spokesman for State Farm Insurance, said his company is working on greater discounts for homeowners, but he would not tie immediate discounts to participation in My Safe Florida Home.

"We believe our discounts are already good discounts," Glover said. "The goal is to protect the home against hurricanes and protect the families in those homes. You didn't have to pay that deductible. You didn't have to live in a FEMA trailer while you repaired your home."

Chapman-Henderson said the program's inspection process has uncovered potential discounts for homeowners that they should already be getting.

But she said there are barriers to discounts that require remedies beyond making homes stronger. Those barriers include a lack of a standardized discount form for all insurance companies and structural differences in each dwelling.

She said the point of My Safe Florida Home is to ensure homes are safe and withstand storms - though one of FLASH's subcontractors apparently did not get the message.

That would be Applied Research Associates, one of the two companies that conducted the home inspections. Callers to the company get this message:

"Hello, you have reached Applied Research Associates. Our business is helping Floridians apply for immediate relief from their current homeowners' insurance premiums by performing residential and commercial wind storm mitigation inspections."