|Date:||June 15, 2017|
OLDWICK, N.J.--(BUSINESS WIRE)--In this recent A.M.BestTV episode, Chris Draghi, financial analyst, A.M. Best, reviews a Best’s Special Report, which looks at Florida's practice of allowing contractors to assume responsibility from insureds for insurance repairs and how insurers are responding. Click on http://www.ambest.com/v.asp?v=floridaaob617 to view the entire program.
The assignment of benefits (AOB) has been part of the Florida insurance landscape for many years. However, this practice has led to issues for the state's insurers in recent years.
“In Florida, AOBs are used to help facilitate payment of claims with the insurance policyholders and a third party. If used appropriately, it has been helpful, but recently there has been some mistreatment,” said Draghi.
“Some contractors are actively soliciting homeowners for claims in which they identify certain coverage to be obtainable. They offer the homeowners the ability to handle the claim, as long as they sign over the benefits to the contractors.”
Draghi continued that, “Once the contractors have the benefits assigned to them, they perform some unnecessary repairs and then submit that claim to an insurance company. The insurance company then has to deal with a claim that is more than it anticipated. It can either pay the claim at a higher cost or take it to court.”
Showing how this is becoming a problem in Florida, Draghi noted that in 2006, there were approximately 400 AOB-related lawsuits, but in 2016, the number of lawsuits had grown to more than 28,000. In addition, he said the AOB issue has driven a dramatic increase in frequency and loss severity on homeowner water claims.
To access a copy of this Best’s Special Report, titled, “Florida Market Faces a New Kind of Storm,” please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=261825.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.