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Insurance Consumer Advocate

Sha'Ron James


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Home insurance premiums must be brought under control

 

Date: April 21, 2017
Source: News-Press
Author:  Steve Pociask

 

While Hurricane Matthew brushed along the Atlantic coast last year, no major hurricane has made landfall in Floridasince 2005. Despite that luck, homeowner insurance premiumsremain very high, and have experienced double-digit annual increases in Southeastern Florida. Over the next 5 years, rate hikes are expected to increase over 60% in Miami-Dade County alone.

The increase in premiums is unquestionably due to nonweather-related claims resulting from the state’s Assignment of Benefits (AOB) process. AOB was originally designed to help Florida’s consumers get their insurance claims paid and damages repaired promptly by authorizing insurers to directly pay vendors and contractors for home repair work. But in recent years, shady repair vendors have been soliciting consumers to sign sweeping AOBs that in effect allow them to take over all the rights and benefits of the insurance policy.

When homeowners sign over control of their insurance claims, they often do so under pressure and before their insurance representatives can inspect damages. The AOB process attracts dishonest contractors – including some water extraction companies, mold remediators, roofers and others – who inflate claims costs. Those costs are later passed on to consumers in the form of higher insurance premiums.

Exacerbating the problem is that the current law permits one-way attorney fees – where attorneys winning lawsuits against insurers can receive reimbursement of their legal fees, while insurers winning lawsuits against dishonest attorneys cannot receive reimbursement. These fees encourage lawsuits against insurers, while discouraging insurers from challenging questionably high repairs costs.When they do question them, they are sued.

Publicly available data show that AOB lawsuits have increased by 300% in just the last few years. From 2013 to 2016, a quarter of all of these lawsuits were filed by just 11 attorneys in the state. The “sue and settle” cabal is very profitable.

Every legislator in Tallahassee is fully aware that this has become the major driver of high insurance rates, yet many are content to help their trial attorney friends over homeowners like you. The Wall Street Journal has pointed this out before and most recently singling out legislative members in leadership positions who defend the trial attorney lobby, instead of doing what is right for consumers.

This issue has been around now for several years, but the Legislature has failed to produce a remedy. This year, a bill sponsored by state Representative Jamie Grant offers hope for reform, but has a long way to go with time running out in the session. If this bill gets blocked, it would be a travesty for consumers, but a great victory for some trial attorneys that make a living out of soaking the public from lawsuits and one-way fees.

It has been over a decade since the last hurricane came ashore, yet consumers are paying more because of skyrocketing nonweather-related claims. Failure to fix the “sue and settle” AOB system in Florida means that consumers lose. This will represent a major legislative failure, one that consumers and Florida voters should not forget.

Steve Pociask is president of the American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization. For more information, visit www.theamericanconsumer.org or follow @consumerpal on Twitter.