Citizens Property Insurance Corp.’s recommendation to raise rates an average of 6.8 percent statewide underscores the immediate need for state lawmakers to stop Assignment of Benefits (AOB) abuse.
Citizens’ board of directors, in approving the 2017 rate package proposal today, said the increases are necessary because of skyrocketing non-weather-related water loss claims in South Florida, a trend that is spreading statewide. Many of the claims are fueled by abuse of AOB, which allows unscrupulous home repair vendors and trial attorneys to take control of a homeowner’s policy, inflate a claim and sue an insurance company that disputes the bill.
“Citizens’ decision to recommend rate increases for homeowners across Florida should sound the alarm that Assignment of Benefits scams have reached a critical level,’’ said Florida Chamber President Mark Wilson, President and CEO of the Florida Chamber of Commerce, which spearheads the coalition. “What started out as a South Florida problem has become a statewide crisis that no longer can be ignored and left to fester. We have to act now to put these bad actors out of business.’’
The Florida Chamber and its Consumer Protection Coalition has been a leader in pushing for AOB reform, warning that AOB abuse hurts homeowners, erodes Florida’s business-friendly environment and threatens the stability of the state’s insurance market. In fact, last week I personally testified at the Florida Insurance Consumer Advocate’s forum on Florida’s water loss crisis and advocated for solutions.
In recommending the higher rates, Citizens said the surge in non-weather-related water losses has increased its claims payments and litigation costs, reducing the financial progress the agency has gained from going a decade without a hurricane. Given the latest data, rates in Miami-Dade, Broward and Palm Beach counties would have nearly tripled because of all the water claims but, by law, can’t go up more than 10 percent.
Last year in South Florida, more than 55 percent of claims submitted involved an AOB or had legal representation before the claim was even reported to Citizens. Claims with an AOB cost more than twice the amount of a claim without an AOB.
The Florida Chamber and Consumer Protection Coalition support efforts by Citizens to curb AOB abuse, which include encouraging policyholders to call Citizens first after sustaining damage. In addition, the Florida Office of Insurance Regulation recently approved administrative changes allowing Citizens to inspect the property before repairs are done and capping the amount of non-approved emergency services.