Citizens CEO Notes Impact of AOB Reforms as New Rates to Take Effect in Florida

The head of Citizens Property Insurance Corp. says it is already seeing a difference in assignment of benefits (AOB) litigation since reforms passed by the Florida Legislature took effect in July. Meanwhile, many Citizens policyholders may see premium relief from the new law, as the insurer’s post-AOB reform rates will take effect next month.

Speaking at the Florida Chamber of Commerce’s Insurance Summit in Miami in early November, Citizens President, CEO and Executive Director Barry Gilway said thanks to AOB reform Citizens litigation has dropped from 2,000 to 1,750 suits a month over the last two months.

AOB claims are also trending down. Gilway told attendees that prior to the reforms being enacted Citizens received about 800 to 900 AOB claims per month. In July, once the reforms took effect, the number was down to 707, followed by 468 in August, 375 in September and 374 in October.

“I really believe that we have substantial facts, substantial data – that all the work that was done that came together to pass AOB will have a huge impact,” he said. “We have some initial indication that it is working. The bottom line is we can mine what the next steps might be for first party litigation which is still a huge issue.”

The law took effect July 1, 2019.

Gilway noted that AOB claims have to be compliant with the new AOB statute in House Bill 7065 in order to be considered, which is creating a “two-fold benefit” because there has been a reduction in the number of claims as well as the ability to eliminate those AOB claims that are non-compliant.

He emphasized that insurers have to follow the timeline that the bill requires to take advantage of its protections and track the impact on claims. Insurers are also required by the state Office of Insurance Regulation to report each residential and commercial property insurance claim paid in the prior calendar year under an assignment agreement through January 2022.

“It is going to be absolutely critical for all companies to follow this timeline very, very religiously and make sure all of the components of this bill are tracked and followed to determine the impact,” he said. “If an insurance company doesn’t comply, they will lose the benefits of [HB] 7065.”

Citizens has taken several steps internally to comply with the new legislation and track how its costs will be affected going forward. In fact, Citizens has created a separate unit that just focuses on AOB claims and litigation.

“We are tracking every single element of the bill,” Gilway said.

Citizens’ rates approved by Florida’s insurance regulator after AOB reforms were enacted will take effect next month. The rates are expected to be lower for many policyholders after the insurer resubmitted its rate filing as part of a new law passed by Florida lawmakers in the last legislative session.

The Florida Office of Insurance Regulation (OIR) released the newly established rates in July for commercial lines and personal lines, which show significant reductions from the previous filed increases by Citizens as a result of the AOB reforms.

OIR said the new rates for each line of business “highlight the impact of AOB reform on requested rates.”

Prior to the enacting of the new AOB reform law, Citizens filed for rate increases for 97 percent of its homeowners policyholders for this year to offset litigation costs. The overall requested rate increase Citizens requested from OIR in December 2018 was 8.2%. However, the new law stipulated that the insurer may not implement any rate changes this year unless the 2019 rate filing reflected projected rate savings from the reforms.

The effective date of the rate changes for all three accounts (Coastal, Commercial Lines, and Personal Lines) is Dec. 1, 2019.

“We are pleased to see that AOB reforms passed by the legislature are already having a positive effect on rates. We will be closely monitoring new rate filings to ensure that costs savings are passed along to Florida consumers,” Florida Insurance Commissioner David Altmaier said in July.