OIR Report Shows Need to End AOB Abuse, Coalition Says Consumers Could Face Higher Premiums Without Reforms, Report Says

TALLAHASSEE, Fla. (Feb. 8, 2016) – A new report by state insurance regulators shows that water damage claims and the use of Assignment of Benefits (AOB) are rising rapidly across Florida and underscores the urgency for state legislators to enact meaningful reforms during the 2016 legislative session, the Consumer Protection Coalition said Monday.

The analysis conducted by the Florida Office of Insurance Regulation of water claims data provided by the top 25 private homeowners’ insurance companies in the state, shows that the frequency of water damage claims skyrocketed 46 percent between 2010 and 2015, and is growing at an average annual rate of 8.3 percent.

Meanwhile, the average severity – or total cost – of water claims has increased 28 percent in the same five-year period, with average costs rising 5.4 percent annually. The combined impact of the increases in both the frequency and severity of water damage claims results in private market insurers facing an average 14.2 percent increase in water losses each year, the report said.

The OIR report warns that if current water claims and AOB trends persist, consumers may face rate increases of 10 percent or more annually as private insurers grapple with rising losses associated with the surge in water claims in many parts of Florida.

“If there were no other perils covered under the policy and no changes in expenses from year to year, an insurer may need to increase its rates by 10 percent or more each year (depending on the insurer’s expenses) just to break-even due to the increase in water losses,” the OIR report said.

The OIR report – combined with recent data released by Citizens showing that water damage claims and AOB abuse are unnecessarily driving up costs for Citizens’ policyholders – is a wake-up call for all Floridians and demonstrates the need for state legislators to enact real reforms before the current legislative session ends March 12, said Mark Wilson, President of the Florida Chamber of Commerce, which is spearheading the Consumer Protection Coalition.

“This report documents what the Consumer Protection Coalition has been warning. Unscrupulous trial attorneys and shady home repair firms are responsible for a huge surge in water damage claims involving AOB that is spreading statewide and Florida’s consumers are paying the bill for this abuse,” Wilson said. “The coalition is asking legislators to stop the abuse now, because this problem is growing worse, taking money from consumers’ wallets, and threatening Florida’s economic progress.”

The OIR report also found that water claims involving AOB are, on average, 50 percent or more costly than claims without an AOB, and that the total number of water claims using AOB had risen from 6 percent in 2010 to 16 percent in 2016. While Southeast Florida has witnessed the largest increase in AOB claims, Central Florida and Southwest Florida are also seeing rapid increases in water claims using AOB, the report said.

The Consumer Protection Coalition – which includes a wide array of stakeholders such as consumer advocates, realtors, bankers, construction contractors, business associations, insurers and insurance agents – is advocating for AOB reforms this session that will ensure the consumer stays in control of the insurance policy they bought and paid for. Currently, AOB abuse is resulting in consumers being pressured or inadvertently signing away all the rights and benefits to their insurance policies – leading to inflated claims, homeowners left hanging with repairs unfinished, higher premiums, and even lawsuits filed against the homeowners’ insurance company, without the knowledge or consent of the policyholder.

The coalition believes the key to halting the explosion of water damage claims and AOB abuse is for legislators to enact reforms that result in the policyholder maintaining the exclusive right to enforce the rights and benefits under their policy. Florida state Senator Dorothy Hukill (R-Port Orange) has a bill, Senate Bill 596, that does just that; her bill keeps the policyholder in charge of the claim and the insurance policy. Senate Bill 596 passed out of the Senate Banking and Insurance Committee last week.

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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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