More than 125 insurance agents from across Florida, along with members of the Consumer Protection Coalition (CPC), march to the Florida Capitol on Wednesday to highlight the need for Assignment of Benefits (AOB) reform. Photo by Colin Hackley.
Insurance agents from across Florida marched together on the state’s capitol Wednesday to deliver a message to Florida lawmakers: It’s time for assignment of benefits (AOB) reform.
Carrying signs that read “STOP AOB ABUSE,” about 125 members of the Florida Association of Insurance Agents (FAIA) were accompanied by representatives from the Florida Consumer Protection Coalition (CPC) as they carried their message from downtown Tallahassee to the Florida Capitol building.
“We are here with folks who see it every day,” said Jeff Grady President of FAIA, which represents about 2,000 property and casualty independent agencies in the state, in a video by CPC. “Rates are going up and coverages are becoming less. Consumers are losing because of the failure of the legislature to address AOB fraud.”
Contractors and attorneys are being blamed for abuse of AOB’s by taking control of a homeowner’s policy, inflating water or roof damage claims, and then suing the insurance company when it disputes the bill.
CPC, which consists of business leaders, consumer advocates, real estate agents, construction contractors, insurance agents and insurance trade groups pushing for reforms to end AOB abuse, has worked for two years to call attention to the problem. The march was the group’s latest effort to get lawmakers attention after they have failed to agree on reform in the previous five sessions.
Barry Gilway, CEO of Citizens, the state-run insurer of last resort, also attended the march with a message for lawmakers. Citizens has faced the brunt of AOB abuse, particularly in South Florida. But Gilway says things are just getting worse.
“Here is the scary part, this used to be Southeast Florida problem – it’s not a Southeast Florida problem anymore, its spreading across the state,” Gilway said. “The ultimate payer in this situation is the consumer – it’s that simple – they will pay the price.”
Rates have already started going up for many Florida homeowners, but that’s just the tip of the iceberg, says the industry. Many insurers are also responding by refusing to write in certain zip codes or are tightening coverage offerings.
Citizens raised rates last year and was approved to do so again in 2018. The company has said policyholders should expect rate increases for the foreseeable future. Citizens also blames AOB for an expected increase to its policyholder count after several years of shedding policies to the private market.
Lawmakers have accused the industry of exaggerating the effect of the abuse and using it as an excuse to raise rates. But the numbers look to be on the industry’s side. A recent data call report from the Florida Office of Insurance Regulation (OIR) of water or roof damage claims from private insurers between Jan. 2015 and June 2017 found that the frequency of water claims per 1,000 policies increased 44 percent since 2015 and severity increased by 18 percent.
The use of AOB’s on water claims has increased from 12.8 percent in 2015 to 17 percent in 2017, OIR said. According to the Florida Justice Reform Institute, there has been a 300 percent increase in AOB lawsuits since 2010.
“This is not an emotional issue – just let the data speak for itself,” said Florida CFO Jimmy Patronis, who spoke to agents at a breakfast before Wednesday’s march and has also been vocal about the need for AOB reform.
Patronis urged lawmakers to act, saying the increase in AOB lawsuits is “a total exploitation of the law.”
“I hope the [legislature] will pass meaningful legislation that, at the end of the day, will keep insurance in the state of Florida as low as it can for our consumers,” he said. “It’s an issue that is going to potentially affect every insurance policy in the state of Florida if we don’t do something about it.”
Grady said the industry has tried to get that message across to legislators, but for the last five years it hasn’t been received. The industry is hopeful this year will be different.
“These folks are here firsthand with the experiences of their consumers to tell legislators to get this done,” Grady said.
For their part, lawmakers have been weighing several bills that would address the problem since the 2018 Florida Legislative Session kicked off earlier this month.
But which path lawmakers choose is a point of contention and concern for the insurance industry. So far the Florida House has passed a bill the industry supports, House Bill 7015, but the Florida Senate has yet to act on it.
The industry says it would be the most effective at reforming AOB because of provisions addressing Florida’s “one-way attorney fee” statute. The statute, designed to be a policyholder protection for those suing an insurance company, has been the main