Home fortifications, from roof tie-downs to window protections, have been recognized as key factors in reducing losses, claims and premiums in hurricane-prone states like Florida.
But relying on the incentive of premium discounts is not enough to prompt widespread adoption of mitigation measures, especially for low- and moderate-income households, according to a new study that examined more than 20 years of data from Florida’s Citizens Property Insurance Corp.
“Our findings underscore that rising insurance premiums can increase adaptation, but only if paired with policies that target financial constraints for low-income and low-wealth households,” the study concluded.
The paper was authored by four professors at three universities, including Vikas Soni, assistant professor and director of the Merrill Lynch Wealth Management Center at the University of South Florida. It was published by the Brookings Institution’s Hutchins Center on Fiscal and Monetary Policy.
The study acknowledged that the $300 million My Safe Florida Home program, which prioritizes lower-income homeowners, provides state-funded matching grants of up to $10,000 for retrofits. And property insurers in Florida offer discounts of as much as 44% for some mitigation steps, such as window and door opening protection. Opening protections and stronger roof-to-wall connections, such as hurricane clips and straps, can provide the largest discounts, amounting to a mean value of about $6,000 over 25 to 30 years, the report indicated.
But the policyholders who need to save the most on homeowners insurance premiums are least likely to pay for protective retrofits, the study found. Wealthier homeowners will respond to higher insurance costs by investing more in climate-resistant building features. The premium discounts—greater for higher-value homes—outweigh the cost of hardening work.
“In contrast, lower-income households and those facing higher adaptation costs reduce their investments when premiums rise—premium increases tighten an already binding budget constraint, crowding out the upfront expenditures required for adaptation,” the authors wrote.
Changes in public and insurance industry policy could help, they said. The My Safe Florida Home program, similar to mitigation grant programs in other states, offers one template, the study said. But others are needed, including targeted subsidies for upgrades, more low-interest financing for home retrofits, and means-tested premium assistance programs that preserve the incentive to adapt while relieving financial strain.
