With 2016 Hurricane Season Underway, Florida AOB Storm Mounting

As hurricane season rolls on in Florida, one of the best protections against storms is a strong homeowner/insurance agent relationship.

Having the right policy is just the start. Agents can help homeowners protect themselves by explaining what their policy covers, what their deductible is and, most importantly, what they should do if they experience a loss.

Now more than ever, it is crucial that agents and brokers work closely with policyholders to ensure homeowners call their agent first to report damage and seek referrals for reputable repair companies. Otherwise, they may fall prey to unscrupulous contractors or unlicensed vendors who try to abuse the system and increase claims costs through a policy provision called assignment of benefits, or AOB.

Inflated claims related to AOB are the greatest threat to Florida’s insurance market aside from legitimate storm losses incurred by policyholders and insurers. Over time, AOB has become a way for bad actors to take control of a policy, inflate the scope and cost of claims, and sue the insurance company if it refuses to pay.

While Florida has been fortunate to go 10 years without major storm losses, abuse involving AOB is jeopardizing the market’s stability and, if not addressed, could lead to increased insurance rates statewide. A hurricane or significant storm could create an explosion of inflated or bogus claims, underscoring why agents need to warn clients about the risks of signing an AOB.

AOB abuse has skyrocketed in the past decade. State-run insurer, Citizens, is facing the worst of it. The insurer raised premiums this year for South Florida insureds because of an avalanche of non-weather-related water damage claims and AOB litigation. Citizens warned statewide rates could rise 10 percent annually if abuse persists; 2017 rates will go up by 6.8 percent.

Meanwhile, the state’s fourth-largest private homeowners’ insurer is raising rates an average of 15 percent statewide due to a surge in water loss claims and AOB lawsuits. Other private insurers are following suit, meaning consumers statewide are being pick-pocketed by AOB scammers because state legislators have allowed abuses to grow unchecked.

The Personal Insurance Federation of Florida, whose members write more than 20 percent of all homeowners’ policies in the state, has been seeking legislative reforms to AOB abuse for four years. But key reforms have been blocked by pressure from trial lawyers and repair vendors who have teamed up to profit from this scheme.

PIFF is working with the Consumer Protection Coalition, a group of business leaders, consumer advocates, real estate agents, construction contractors, insurance agents and insurance trade groups formed earlier this year to address AOB abuse.

As Florida goes through another hurricane season, AOB abuse looms as the next big storm. It is real, growing and already hurting the pocketbooks of Florida families. Let’s hope the wind doesn’t blow this season and make the problem dramatically worse. And let’s hope that members of the State Legislature who continue to oppose reforms will realize their constituents are paying for their inaction and pass real reforms that protect consumers in 2017.