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Insurance Consumer Advocate

Sha'Ron James


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Mailing: 200 East Gaines St.
Tallahassee, FL 32399-0308

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Why Florida's home insurance rates could double

 

Date: August 17, 2017
Source: Insurance Business America
Author:  Lyle Adriano

 

A rash of insurance claims in recent years threatens to significantly raise Florida’s insurance premiums.

Some believe the blame falls on the lawyers and “restoration companies” that abuse the “assignment of benefits” (AOB) practice, which allows policyholders to sign over their claims for damages to the company, which then negotiates a settlement with the insurer.
Because policyholders forfeit all their rights to negotiate with their insurer upon signing an AOB form, the most devious of “restoration companies” are free to inflate claims to get the most out of the payouts.

“This is costing the honest Floridian enormous pain,” former state chief financial officer Jeff Atwater told CBS News.

Atwater added that insurance premiums are “flying off the chart” because “a few law firms, along with a few contractors, have found a way to make the most of this opportunity.”

Even Citizens Insurance, Florida’s state-run insurer of last resort, is at the mercy of AOB claims. While it could handle one-in-one-hundred-year storms, AOB claims have backed Citizens against the wall – the insurer had to tap into its surplus hurricane funds after losing $35 million the previous year on its personal lines account.

Data from Citizens suggests that the surge in AOB claims is lawyer-driven, after the insurer found that many of the claims appear to be from the same legal firms.

“As of June 2017, 83% of claims submitted to Citizens Insurance had legal or AOB representation before the claim was even submitted to Citizens,” the state insurer said.

Citizens noted that many of the AOB abuses were concentrated in Miami, Palm Beach and Broward counties, but are slowly spreading to other parts of the state.

CBS News reported that the Miami-Dade county of Southeastern Florida is where most of the AOB claims come from. Due to the sheer number of claims being made, homeowners’ insurance coverage for a $300,000 home in the area could see rates nearly double, to $8,000 a year by 2022.

According to data from insurer Security First, the average water damage claim (a common claim in Florida) without an AOB claim is $6,700. An AOB claim, on the other hand, can more than double the cost to $13,750. If the contractor enlists an attorney, the claim can surge to an even higher $26,000.