Florida’s Citizens Property Insurance Analysis Shows Assignment of Benefits Increases Costs
Jan 21, 2016
A detailed analysis conducted by Citizens Property Insurance Corporation (“Citizens”) for state insurance regulators has concluded that water loss claims, exacerbated by assignment of benefits (“AOB”), are driving higher rates in South Florida and increasingly across the state.
Responding to a mandatory data call from the Florida Office of Insurance Regulation (“OIR”), the analysis further indicates that the frequency and severity of claims filed under an assignment of benefit is growing at a disturbing rate. Citizens’ actuaries analyzed data for both litigated and non-litigated claims, with and without an assignment of benefits, or AOB, under which homeowners sign over control of their claim to water remediation companies, contractors and/or attorneys.
The analysis found that cases in which customers assigned benefits to contractors or remediation companies were almost twice as expensive on average, and more likely to lead to litigation. It also showed that the average litigated claim cost is more than double that of a non-litigated claim, showing that AOB and litigation work both separately and together to drive average claims costs more than four times higher than that of a simple non-assigned, non-litigated claim.
To view the analysis, which was released today, January 21, 2016, click here.
“Consumers are losing control of their claims by transferring their authority to contractors and attorneys under the current assignment of benefit system,” said Chris Gardner, Chairman of Citizens Board of Governors. “This analysis shows clearly that AOB is raising water claims losses. Those higher costs are paid by all policyholders. We have a dual obligation of protecting our policyholders while keeping premiums as affordable as possible.”
The analysis re-affirms earlier studies showing that water loss claims are the leading cause of higher insurance rates, especially in Palm Beach, Broward and Miami Dade counties. Water claims are being filed at double the rate of just two years ago in the Tri-County area and triple the rate of two years ago across the rest of the state.
Age of a home was not a significant cost driver, the study concluded.
Recent claims are increasingly represented by third parties under an assignment of benefits, which indicates a likely spike in costs going forward. By Florida law, predicted costs must be fully reflected in the rates established for Citizens by the OIR.
“The skyrocketing frequency of claims both inside and outside the Tri-County region, coupled with the demonstrated effect of both AOB and litigation as massive cost drivers is an ominous sign,” said John Rollins, Citizens’ Chief Risk Officer. “As a result, Citizens customers all over Florida can expect a round of rate hikes in 2017 unless we can work with the Legislature and the Office of Insurance Regulation to achieve reforms and changes that will lower predicted future non-weather claims costs,” he said.
Under the heading of “The Consumer Protection Coalition,” Citizens has joined a coalition of consumer, business and agent groups to educate the public and other stakeholders about the need to make changes to state law regarding assignment of benefits. The group will work over the next several weeks to educate consumers and lawmakers as they address potential changes to Florida’s AOB process.
The organization has created an online petition at www.FightFraud.Today.
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