Florida Business, Insurance Leaders: Assignment of Benefits (AOB) Abuse Hurting Consumers

TALLAHASSEE, Fla. (Jan. 26, 2016) – Abuse of Assignment of Benefits (AOB) is threatening Florida’s families and businesses and must be reformed immediately before it leads to statewide insurance rate increases for policyholders, members of the Consumer Protection Coalition said today.

Florida Chamber of Commerce President and CEO Mark Wilson, three-time former Insurance Consumer Advocate Steve Burgess and Personal Insurance Federation of Florida Executive Director Michael Carlson said AOB abuse is spreading statewide and hitting the wallets of hardworking Floridians trying to protect their homes.

“Assignment of Benefits fraud and abuse is a problem that has been growing for several years and is hurting both consumers and Florida’s business environment,’’ said Wilson during a media conference call. “The Florida Chamber of Commerce recognizes the seriousness of this problem and has partnered with organizations throughout Florida in creating the Consumer Protection Coalition to seek meaningful reform in the 2016 legislative session.’’

The coalition formed earlier this month to protect consumers from unscrupulous home repair vendors and trial attorneys who use AOB to take control of a homeowner’s insurance policy, then inflate the cost of repair work and file costly lawsuits against insurers who question the bill. The broad-based group of consumer advocates, business leaders, contractors, Realtors, insurance officials and others advocates that homeowners don’t need to sign an AOB form in order to get repairs done. They can go directly to their insurance company to handle a claim and, if they aren’t satisfied with how a claim was settled, they can take action against their insurer.

“It all boils down to this: Consumers should stay in control of the insurance policy they bought and paid for,’’ Carlson said. “They shouldn’t have to sign away their rights and benefits through an AOB.’’

Over the past several years, the number of lawsuits against insurers that involve an AOB has skyrocketed 193 percent. According to the Florida Justice Reform Institute, less than 3 percent of all insurance litigation involved AOB in 2000. By 2015, more than 50 percent of all litigation involved AOB, and the majority of plaintiffs were trial attorneys or vendors they represent, not the actual policyholders.

The problem is already having dire consequences. This summer, Citizens Property Insurance Corp. was forced to raise premiums for South Florida policyholders by about 8 percent because of the explosion of non-weather-related water damage claims and AOB litigation. At a committee hearing on Rep. Matt Caldwell’s bill on AOB reform (HB 1097) Citizens’ chief risk officer said the insurer may have to raise rates statewide by up to 10 percent next year if AOB abuse isn’t curtailed.

As a former, longtime Insurance Consumer Advocate for Florida, Burgess said he recommends consumers retain control of their policies rather than be pressured into signing over their rights to a third party.

“By allowing the vendor to collect directly from the insurance company, the homeowner loses their most effective tool to assure that repairs are completed to their satisfaction,” said Burgess.

Giving control of an insurance policy to a third party has resulted in significantly higher claims. The average, statewide cost of a non-litigated water damage claim without an AOB is about $8,000, according to Citizens. But for a water damage claim with an AOB that is the subject of a lawsuit the average amount is $38,000.

The Consumer Protection Coalition supports bills by Sen. Dorothy Hukill (SB 596) and Rep. Caldwell as a good start in curbing AOB abuse but urges that the legislation goes further in keeping consumers in control of their policies. The coalition believes policyholders alone should retain the right to take legal action against their insurer over a claim – not a third party who seizes that right. The group says that unless Florida stops third-party vendors and trial attorneys from hijacking policies, the problem will not going away. Rates will go up, at a time when they should be decreasing thanks to a decade without a devastating storm.

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The Consumer Protection Coalition is a broad-based group of business leaders, consumer advocates, real estate agents, construction contractors, insurance agents and insurance trade groups pushing for reforms to end Assignment of Benefits (AOB) abuse. Learn more about the Coalition at www.FightFraud.Today

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