Insurance Reform and Competition

Citizens’ Rate Increase Request Further Proof of Need for Assignment of Benefits Reform

TALLAHASSEE, Fla. (Aug. 18, 2016) – Citizens Property Insurance Corp.’s proposed statewide rate increases demonstrate beyond a doubt that Assignment of Benefits abuse is hurting homeowners and must be addressed during the 2017 legislative session, the Consumer Protection Coalition said today.

During a rate hearing before the Florida Office of Insurance Regulation, Citizens said its recommended 6.8 percent rate increase for personal lines policies was necessary to offset an explosion in non-weather-related water loss claims. In many of the claims, a homeowner signed an AOB enabling an unscrupulous home repair vendor to take over the policy, inflate the cost of the claim and file a lawsuit against the insurance company if it disputed the bill.

“It’s unfortunate that Citizens is here today requesting a rate increase because of a legalized scam that allows the bad behavior of a few to punish everyone,’’ said MARK WILSON, president and CEO of the Florida Chamber of Commerce, which spearheads the coalition. “The coalition has been warning that AOB abuse would directly hit consumers’ wallets, and, regrettably, our fears are coming to fruition.’’

The broad-based coalition of business leaders, consumer advocates, real estate agents, insurance groups and others formed in January to raise awareness about the dangers of AOB abuse and need for reform. The coalition believes that abusive AOB practices and scams are harmful to consumers and jeopardize Florida’s business-friendly environment. The rapidly growing AOB problem also impacts the availability and affordability of insurance, hindering efforts by Citizens, the state-run insurer, to reduce its number of policies and shift homeowners to the private market.

“Citizens is taking the right steps to protect their policyholders should a large hurricane make landfall in the coming months,” said PCI Regional Manager LOGAN McFADDIN, a coalition member. “The last thing Floridians need is another unnecessary cost-driver increasing their insurance expenses as a result of abuse in our current system. We are hopeful this request from Citizens will prompt lawmakers to take a harder look at the problem and stop this type of abuse before it gets worse.’’

During the last legislative session, the coalition pushed for bills that would have added protections to keep homeowners in control of their policies when seeking emergency repairs for a broken kitchen pipe, roof leak or other kind of damage. The group also gathered testimony from actual customers who have been taken advantage of by vendors using AOB to pad their profits.

“This isn’t just a Citizens issue,’’ said MICHAEL CARLSON, president of the Personal Insurance Federation of Florida, and a member of the coalition. “All insurers are feeling the impact, resulting in higher costs for everyone. It’s time to put the bad guys out of business and put consumers back in control of their policies.’’

The coalition has been a vocal supporter of Citizens’ efforts to stop AOB abuse, including its campaign encouraging policyholders to call Citizens first after sustaining damage. Amid rising rates and mounting evidence of AOB abuse, the coalition plans to aggressively seek legislative reform again in 2017.

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