Despite a recent dip in major hurricanes, Florida’s Citizens Property Insurance Corp. has said it may need to raise premium rates by as much as 10%.
That’s down to a raise in questionable, non-catastrophe claims filed by roofers, water extraction firms and other vendors, the Personal Insurance Federation of Florida reported this week.
Under the Assignment of Benefits legal tool, repair vendors receive payment from insurance companies when they work on policyholders’ homes. This prevents homeowners from having to pay money upfront, but in the past 10 years, Citizens say scamming trial lawyers and vendors have taken advantage of AOB to increase the cost of claims and then sue the company if it refuses to pay the bills.
Such abuse has increased during the decade-long lull in hurricanes as workers look for way to boost revenues. In fact, the number of AOB-related lawsuits grew nearly 10000% percent between 2005 and 2014, the PIFF said.
Now, Citizens says it may have to boost statewide rates by up to 10% annually if such abuse continues.
And it isn’t just the estate insurer that is affected. The state’s fourth-largest homeowners’ insurer announced in April that it would need to raise rates an average 15% statewide due to the increase in water loss claims and AOB lawsuits.
Other private insurers are expected to join soon, and if a hurricane hits the Florida coast in 2016, insured losses – and, consequently, premiums – could skyrocket.
Bills introduced to address the issue in the state legislature were dropped February, but a “compromise” bill was introduced. The revisions to the bill included a provision that required notification to insurance companies after a contract is signed between a policyholder and repair contractor.
Insurers and their advocates warned that homeowners can expect higher rates if the abuse of assignment of benefits is not resolved. Counties in Miami-Dade, Broward and Palm Beach were hit the hardest by rate increases due to the issue.
“Given the latest data, rates in those counties would have to nearly triple to pay for non-wind related losses,” Citizens Property Insurance said in a statement. “Under Florida law, Citizens rate increases are limited to 10 percent a year.”