Florida House Plan Would Shift AOB Savings to Policyholders

10 Apr

A recently added amendment to the Florida State House assignment of benefits (AOB) reform bill would prevent Citizens Property Insurance Corp. from raising rates unless they pass the savings from AOB reform along to their customers.

“We are consistently told that AOB reform is necessary and will halt skyrocketing insurance costs in some areas and prevent those same forces from taking root elsewhere,” House Speaker Jose Oliva said in a recent FLAPOL article.

“Florida House Republicans believe that if these reforms are successful, the ratepayers should receive the benefits. I commend Chairman [Chris] Sprowls, Chairman [Paul] Renner, and Chairman [Bob] Rommel for this legislation and hope the Senate will join us in this endeavor,” Oliva said in the article.

Filling out and signing an AOB form basically allows homeowners to transfer their homeowners insurance policy benefits to a contractor, roofing company or even a lawyer. This allows the contractor to make decisions about the work as well as bill the insurance company directly. 

The issue is that many contractors overbill or even bill the insurance company for work they didn’t perform. When the insurer denies the claim the contractor partners with a less than honest law firm to sue the insurer. Most insurers end up settling.

The way the current law is written, insurance companies must cover the cost of legal fees for anyone that brings a suit against them related to a claim so there is very little downside for attorneys and contractors bringing a lawsuit, regardless of its merits. 

The rise in AOB lawsuits has been dramatic. Data from the Insurance Information Institute (III) found that in the year 2000 there were about 1,300 AOB lawsuits in Florida. This number jumped up to 79,000 in three years and through November of 2018 there were 135,000 AOB related lawsuits. This is an increase of 70 percent increase. 

The Amendment Requires Citizens to Share the Savings

The amendment to HB 7065 would require Citizens to pass AOB premium savings onto policyholders by blocking rates changes to their homeowner policies as well as tenant occupied property policies. Citizens Property is the state-run insurer of last resort. 

If the bill and amendment passes and is signed into law, any time that Citizens filed a rate increase they would have to include an exhibit that shows the impact that AOB reform had on the rates and also provide policyholders with information about the rate and any AOB savings. 

“The purposes of AOB reform are to ensure homeowners are protected from excessive rate increases caused by AOB abuse. This reform will lower costs for property insurance,” Renner said in the FLAPOL article.

“We expect, and Floridians demand, that the savings should be passed on to the hardworking people who pay the bills. This is especially true when it comes to a government run insurer. This is consistent with our principles and that is how we will govern,” Renner continued in the article.

The Restoration Association of Florida, which has forcefully opposed any AOB reform, was happy to see an amendment but would like to see the requirement applied to all insurers in the state instead of just Citizens.

“On behalf of Florida’s independent restoration contractors, we couldn’t agree more with the idea requiring Citizens Insurance to pass along its savings of false AOB litigation to Florida taxpayers,” said RAF spokesperson Amanda Prater in the FLAPOL article. 

“This should be required of all insurance companies doing business in Florida. RAF believes true savings will be realized once all insurance carriers simply pay homeowner claims fully and in a timely manner to avoid any litigation at all,” Prater said in the article.

The house bill 7065 has now cleared all its committee assignments and is being prepared for a floor vote.

You can visit our Florida homeowners insurance rates page to help answer any questions you have about home insurance in Florida, average home insurance rates and discounts.

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