House Bill 1427

AN ACT TO PROVIDE THAT RATE FILINGS FOR RESIDENTIAL PROPERTY INSURANCE MUST INCLUDE DISCOUNTS, CREDITS OR OTHER RATE DIFFERENTIALS FOR PROPERTIES ON WHICH CONSTRUCTION TECHNIQUES THAT HAVE BEEN DEMONSTRATED TO REDUCE THE AMOUNT OF LOSS IN A WINDSTORM HAVE BEEN INSTALLED OR IMPLEMENTED; TO ESTABLISH A PROGRAM BY WHICH HOMEOWNERS MAY OBTAIN AN EVALUATION OF THE WIND RESISTANCE OF THEIR HOMES WITH RESPECT TO PREVENTING DAMAGE FROM HURRICANES, TOGETHER WITH A RECOMMENDATION OF REASONABLE STEPS THAT MAY BE TAKEN TO UPGRADE THEIR HOMES TO BETTER WITHSTAND HURRICANE FORCE WINDS; TO ESTABLISH WITHIN THE DEPARTMENT OF INSURANCE A COMPREHENSIVE HURRICANE DAMAGE MITIGATION PROGRAM, WHICH SHALL CONSIST OF A COST-BENEFIT STUDY ON WIND HAZARD MITIGATION CONSTRUCTION MEASURES, WIND CERTIFICATION AND HURRICANE MITIGATION INSPECTIONS, FINANCIAL GRANTS TO RETROFIT PROPERTIES, EDUCATION AND CONSUMER AWARENESS EFFORTS, AND AN ADVISORY COUNCIL; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. (1) Effective July 1, 2007, a rate filing for residential property insurance must include actuarially reasonable discounts, credits or other rate differentials, or appropriate reductions in deductibles, for properties on which fixtures or construction techniques demonstrated to reduce the amount of loss in a windstorm have been installed or implemented. The fixtures or construction techniques shall include, but not be limited to, fixtures or construction techniques that enhance roof strength, roof covering performance, roof-to-wall strength, wall-to-floor-to-foundation strength, opening protection, and window, door and skylight strength. Credits, discounts or other rate differentials for fixtures and construction techniques that meet the minimum requirements of the International Residential Code or the International Building Code must be included in the rate filing. All insurance companies must make a rate filing that includes the credits, discounts or other rate differentials by January 1, 2008. By January 1, 2009, the Department of Insurance shall reevaluate the discounts, credits, other rate differentials and appropriate reductions in deductibles for fixtures and construction techniques that meet the minimum requirements of the International Residential Code or the International Building Code, based upon actual experience or any other loss relativity studies available to the department. The department shall determine the discounts, credits, other rate differentials and appropriate reductions in deductibles that reflect the full actuarial value of that revaluation, which may be used by insurers in rate filings.

     (2) (a) A rate filing for residential property insurance made on or before the implementation of paragraph (b) may include rate factors that reflect the manner in which building code enforcement in a particular jurisdiction addresses the risk of wind damage. However, that rate filing also must provide for variations from those rate factors on an individual basis based on an inspection of a particular structure by a licensed home inspector, which inspection may be at the cost of the insured.
          (b) A rate filing for residential property insurance made more than one hundred fifty (150) days after approval by the department of a building code rating factor plan submitted by a statewide rating organization shall include positive and negative rate factors that reflect the manner in which building code enforcement in a particular jurisdiction addresses risk of wind damage. The rate filing shall include variations from standard rate factors on an individual basis based on inspection of a particular structure by a licensed home inspector. If an inspection is requested by the insured, the insurer may require the insured to pay the reasonable cost of the inspection. This paragraph applies to structures constructed or renovated after the implementation of this paragraph.
          (c) The premium notice shall specify the amount by which the rate has been adjusted as a result of this subsection and also shall specify the maximum possible positive and negative adjustments that are approved for use by the insurer under this subsection.

(3) A rate filing made on or after July 1, 2007, for mobile homeowner's insurance must include appropriate discounts, credits or other rate differentials for mobile homes constructed to comply with American Society of Civil Engineers Standard ANSI/ASCE 7-88, adopted by the United States Department of Housing and Urban Development, and that also comply with all applicable tie-down requirements provided by state law.

(4) The Legislature finds that separate consideration and notice of hurricane or windstorm insurance premiums will assist consumers by providing greater assurance that hurricane or windstorm insurance premiums are lawful and by providing more complete information regarding the components of property insurance premiums. Effective July 1, 2007, a rate filing for residential property insurance shall be separated into two (2) components: rates for hurricane or windstorm coverage and rates for all other coverages. A premium notice reflecting a rate implemented on the basis of such a filing shall separately indicate the premium for hurricane coverage and the premium for all other coverages. As used in this subsection:

(a) "Hurricane coverage" means coverage for loss or damage caused by the peril of windstorm during a hurricane. The term includes ensuing damage to the interior of a building, or to property inside a building, caused by rain, snow, sleet, hail, sand or dust if the direct force of the windstorm first damages the building, causing an opening through which rain, snow, sleet, hail, sand, or dust enters and causes damage.

(b) "Windstorm" for purposes of paragraph (a) means wind, wind gusts, hail, rain, tornadoes, or cyclones caused by or resulting from a hurricane that results in direct physical loss or damage to property.

(c) "Hurricane" for purposes of paragraphs (a) and (b) means a storm system that has been declared to be a hurricane by the National Hurricane Center of the National Weather Service.

(5) In order to provide an appropriate transition period, an insurer, in its sole discretion, may implement an approved rate filing for residential property insurance over a period of years. An insurer electing to phase in its rate filing must provide an informational notice to the department setting out its schedule for implementation of the phased-in rate filing.

(6) An insurer may not write a residential property insurance policy without providing hurricane or windstorm coverage, as defined in subsection (4) of this section. This subsection does not apply with respect to risks located in the Coast area that are eligible for coverage by the Mississippi Windstorm Underwriting Association established under Section 83-34-1 et seq.

(7) Any rate filing that is based in whole or part on data from a computer model may not exceed fifteen percent (15%) unless there is a public hearing.

(8) An insurer may implement appropriate discounts or other rate differentials of up to ten percent (10%) of the annual premium to mobile home owners who provide to the insurer evidence of a current inspection of tie-downs for the mobile home, certifying that the tie-downs have been properly installed and are in good condition.

     (9) (a) It is the intent of the Legislature to provide a program by which homeowners may obtain an evaluation of the wind resistance of their homes with respect to preventing damage from hurricanes, together with a recommendation of reasonable steps that may be taken to upgrade their homes to better withstand hurricane force winds.
          (b) To the extent that funds are provided for this purpose, the Legislature authorizes the establishment of a program to be administered by the Mississippi Windstorm Underwriting Association for homeowners insured in the Coast area as defined in Section 83-34-1 et seq.
          (c) The program may provide grants to homeowners, for the purpose of providing homeowner applicants with funds to conduct an evaluation of the integrity of their homes with respect to withstanding hurricane force winds, recommendations to retrofit the homes to better withstand damage from those winds, and the estimated cost to make the recommended retrofits.
          (d) The department shall establish by rule standards to govern the quality of the evaluation, the quality of the recommendations for retrofitting, the eligibility of the persons conducting the evaluation, and the selection of applicants under the program. In establishing the standards, the department shall consult with the State Department of Audit to minimize the possibility of fraud or abuse in the evaluation and retrofitting process, and to ensure that funds spent by homeowners acting on the recommendations achieve positive results.
          (e) The Mississippi Windstorm Underwriting Association shall identify areas of this state with the greatest wind risk to residential properties and recommend annually to the department priority target areas for those evaluations and inclusion with the associated residential construction mitigation program.
          (f) Discounts must be used without any modifications, unless they are supported by detailed alternative studies.

     SECTION 2. There is established within the Department of Insurance a Comprehensive Hurricane Damage Mitigation Program. This section does not create an entitlement for property owners or obligate the state in any way to fund the inspection or retrofitting of residential property or commercial property in this state. Implementation of this program is subject to the availability of funds that may be appropriated by the Legislature for this purpose. The program shall develop and implement a comprehensive and coordinated approach for hurricane damage mitigation that shall include the following:
          (a) Cost-benefit study on wind hazard mitigation construction measures. The performance of a cost-benefit study to establish the most appropriate wind hazard mitigation construction measures for both new construction and the retrofitting of existing construction for both residential and commercial facilities within the wind borne debris regionsof Mississippi. The recommended wind construction techniques shall be based on both the newly adopted Mississippi building code sections for wind load design and the wind borne debris region. The list of construction measures to be considered for evaluation in the cost-benefit study shall be based on scientifically established and sound, but common, construction techniques that go above and beyond the basic recommendations in the adopted building codes. This allows residents to utilize multiple options that will further reduce risk and loss and still be awarded for their endeavors with appropriate wind insurance discounts. It is recommended that existing accepted scientific studies that validate the wind hazard construction techniques benefits and effects be taken into consideration when establishing the list of construction techniques that homeowners and business owners can employ. This will ensure that only established construction measures that have been studied and modeled as successful mitigation measures will be considered to reduce the chance of including risky or unsound data that will cost both the property owner and state unnecessary losses. The cost-benefit study shall be based on actual construction cost data collected for both several types of residential construction and commercial construction materials, building techniques and designs that are common to the region. The study shall provide as much information as possible that will enhance the data and options provided to the public, so that homeowners and business owners can make informed and educated decisions as to their level of involvement. Based on the construction data, modeling shall be performed on a variety of residential and commercial designs, so that a broad enough representative spectrum of data can be obtained. A report shall be provided that will establish tables of data reflecting actuarially reasonable levels of wind insurance discounts (in percentages) for each mitigation construction technique/combination of techniques. Additional data that will enhance the program, such as studies to reflect property value increases for retrofitting or building to the established wind hazard mitigation construction techniques and cost comparison data collected to establish the value of this program against the investment required to include the mitigation measures, also shall be provided.
          (b) Wind certification and hurricane mitigation inspections. (i) Home-retrofit inspections of site-built, residential property, including single-family, two-family, three-family or four-family residential units, and for a set of representative commercial facilities shall be offered to determine what mitigation measures are needed and what improvements to existing residential properties are needed to reduce the property's vulnerability to hurricane damage. A state program will be established within the Department of Insurance to provide homeowners and business owners wind certification and hurricane mitigation inspections. The inspections provided to homeowners and business owners, at a minimum, must include:
                   1. A home inspection and report that summarizes the results and identifies corrective actions a homeowner may take to mitigate hurricane damage.
                   2. A range of cost estimates regarding the mitigation features.
                   3. Insurer-specific information regarding premium discounts correlated to recommended mitigation features identified by the inspection.
                   4. A hurricane resistance rating scale specifying the home's current as well as projected wind resistance capabilities.
     This data shall be provided by trained and certified inspectors in standardized reporting formats and forms regardless of the insurer involved with the property owner to ensure all data collected during inspections is equivalent in style and content that allows construction data, estimates and discount information to be easily assimilated into a database. It also ensures consistency of the program information for the consumers when dealing with more than one (1) insurance company for the comparison of services or when changing policies. Data pertaining to the number of inspections, inspection reports and consumers participating in the program shall be stored in a state database for evaluation of the program’s success and review of state goals in reducing wind hazard loss in the state.
              (ii) To qualify for selection by the department as a provider of wind certification and hurricane mitigation inspections services, the entity shall, at a minimum:
                   1. Use wind certification and hurricane mitigation inspectors who:
                        a. Have prior experience in residential and/or commercial construction or inspection and have received specialized training in hurricane mitigation procedures through the state certified program. In order to qualify for training in the inspection process, the individual should be either a licensed building code official, a licensed contractor in the State of Mississippi, or a civil engineer with a professional engineering license.
                        b. Have undergone drug testing and background checks.
                        c. Have been certified through a state mandated training program, in a manner satisfactory to the department, to conduct the inspections.
                   2. Provide a quality assurance program including a reinspection component.
                   3. Have data collection equipment and computer systems, so that data can be submitted electronically to the state's database of inspection reports, insurance certificates, and other industry information related to this program. It is mandatory that all inspectors provide original copies to the property owner of any inspection reports, estimates, etc., pertaining to the inspection and keep a copy of all inspection materials on hand for state audits.
          (c) Financial grants to retrofit properties. Financial grants may be used to encourage single-family, site-built, owner-occupied, residential property owners or commercial property owners to retrofit their properties to make them less vulnerable to hurricane damage.
              (i) To be eligible for a grant, a residential property must:
                   1. Have been granted a homestead exemption under Mississippi law.
                   2. Be a dwelling with an insured value of Five Hundred Thousand Dollars ($500,000.00) or less.
                   3. Have undergone an acceptable wind certification and hurricane mitigation inspection.
     A residential property that is part of a multi-family residential unit may receive a grant only if all homeowners participate and the total number of units does not exceed four (4).
              (ii) All grants must be matched on a dollar-for-dollar basis for a total of Ten Thousand Dollars ($10,000.00) for the mitigation project with the state's contribution not to exceed Five Thousand Dollars ($5,000.00).
              (iii) The program shall create a process in which mitigation contractors agree to participate and seek reimbursement from the state and homeowners select from a list of participating contractors. All mitigation must be based upon the securing of all required local permits and inspections. Mitigation projects are subject to random reinspection of up to at least ten percent (10%) of all projects.
              (iv) Matching fund grants also shall be made available to local governments and nonprofit entities for projects that will reduce hurricane damage to single-family, site-built, owner-occupied, residential property.
              (v) Grants may be used for the following improvements:
                   1. Roof deck attachment;
                   2. Secondary water barrier;

                   3. Roof covering;
                   4. Bracing gable ends;
                   5. Reinforcing roof-to-wall connections;
                   6. Opening protection; and
                   7. Exterior doors, including garage doors.
              (vi) Low-moderate income homeowners, as defined in regulations of the United States Department of Housing and Urban Development, who otherwise meet the requirements of subparagraphs (i) and (iii) are eligible for a grant of up to Five Thousand Dollars ($5,000.00) and are not required to provide a matching amount to receive the grant. Those grants shall be used to retrofit single-family, site-built, owner-occupied, residential properties in order to make them less vulnerable to hurricane damage.
          (d) Education and consumer awareness. Multimedia public education, awareness and advertising efforts designed to specifically address mitigation techniques shall be employed, as well as a component to support ongoing consumer resources and referral services. In addition, all insurance companies shall provide notification to their clients regarding the availability of this program, participation details, and directions to the state Web site promoting the program, along with appropriate contact phone numbers to the state agency administrating the program. The notification to the clients must be sent by the insurance company within thirty (30) days of filing their insurance discount schedules with the Department of Insurance.
          (e) Advisory council. There is created an advisory council to provide advice and assistance to the program administrator with regard to his or her administration of the program. The advisory council shall consist of:
              (i) A representative of lending institutions, selected by the Department of Insurance from a list of at least three (3) persons recommended by the Mississippi Bankers Association.
              (ii) A representative of residential property insurers, selected by department from a list of at least three (3) persons recommended by the Professional Insurance Agents Association of Mississippi.
              (iii) A representative of home builders, selected by the department from a list of at least three (3) persons recommended by the Mississippi Homebuilders Association.
              (iv) One (1) faculty member of a state university, selected by the department, who is an expert in hurricane-resistant construction methodologies and materials.
              (v) Two (2) members of the House of Representatives, selected by the Speaker of the House of Representatives.
              (vi) Two (2) members of the Senate, selected by the Lieutenant Governor.
              (vii) The Executive Director of the Mississippi Windstorm Underwriting Association.
              (viii) The Director of the Mississippi Emergency Management Agency.
     Members appointed under subparagraphs (i) through (iv) shall serve at the pleasure of the Department of Insurance. Members appointed under subparagraphs (v) and (vi) shall serve at the pleasure of the appointing officers. All other members shall serve as voting ex officio members. Members of the advisory council shall serve without compensation but may receive reimbursement as provided in Section 25-3-41 for per diem and travel expenses incurred in the performance of their official duties.

(f) Federal funding. The Department of Insurance shall use its best efforts to obtain grants or funds from the federal government to supplement the financial resources of the program.
(g) Rules and regulations. The Department of Insurance shall adopt rules and regulations governing the Comprehensive Hurricane Damage Mitigation Program. The department also shall adopt rules and regulations establishing priorities for grants provided under this section based on objective criteria that gives priority to reducing the state's probable maximum loss from hurricanes. However, pursuant to this overall goal, the department may further establish priorities based on the insured value of the dwelling, whether or not the dwelling is insured by Mississippi Windstorm Underwriting Association and whether or not the area under consideration has sufficient resources and the ability to perform the retrofitting required.

SECTION 3. This act shall take effect and be in force from and after July 1, 2007.