Florida’s Citizens Delays Decision on Proposed 2019 Rate Increases

27 Jun
Citizens Property Insurance Corporation

Citizens Property Insurance Corporation

Florida’s Citizens Property Insurance Corp is waiting until December to set its 2019 insurance rates and decide whether it will approve a 7.9 percent statewide increase for homeowners insurance.

It was decided to postpone the increase at a recent Board of Governors meeting. Florida Citizens decided to defer the decision to allow time to review the results of a managed repair program that goes into affect on August 1st, 2018. This program was created to help address rising claim costs related to the assignment of benefits (AOB) fraud and the resulting lawsuits.

Consumer advocates and state leaders have raised concerns about the 7.9 percent rate increase that would have affected all homeowners, condo owners and renters. The increase would have taken affect on February 1st, 2019.

The proposed increase would have raised rates by 8.3 percent for inland homes while coastal homes would have seen a 9.5 percent increase. Increases would have impacted 60 of Florida’s 67 counties.

Citizens Property claims that the rate increases are mainly due to increased litigation costs that are associated with AOB abuse and water damage claims. In Southeast Florida, the litigation rate is roughly 50 percent according to Citizens data. This rate has started to level out after years of increases.

This will be the first year that rates outside of Southeast Florida will be increasing due to AOB and water claims, which are spreading to other parts of the state. Litigation rates outside of Southeast Florida have climbed to 15 to 17 percent.

AOB Issues Still a Big Issue

A recent analysis by Citizens found that the rate increase is necessary because AOB reforms have failed in the Florida legislature. This has led to continuing fraud and litigation costs which drive up costs for the insurer, costs that end up being passed on to policyholders.

AOB abuse happens when a homeowner signs an assignment of benefits form, which turns over their insurance benefits to a contractor or roofer. It allows the contractor to file claims, make decisions about the work and request payment from the insurer.

Problems have cropped up when less than honest contractors submit inflated claims and then partner with shifty attorneys who sue Citizens when the claim is denied. In most cases it makes more sense financially to settle than fight the case in court, pushing up claim costs for Citizens Property.

Citizens has recently made some changes to help cut down on AOB abuse, which will be implemented starting on August 1 of this year. On this date Citizens will start limiting payment of non-weather related water losses to $10,000, which includes $3,000 in emergency water mitigation services for homeowners on a standard HO-3 homeowner policy as well as dwelling DP-3 policies. Non-weather related claims include losses such as a broken pipe causing damage or a leaking water heater.

Citizens says that most policyholders will not be impacted by the change as cost for these types of losses rarely exceed $10,000. The insurer hopes it will help cut down on AOB fraud as most fraudulent AOB claims are related to water damage.

Policyholders who opt in to the Citizens’ Managed Repair Program will not be subjected to the $10,000 limit. The Managed Repair Program lets policyholders choose from a group of local contractors that Citizens has approved. All repairs done under this program come with a three-year warranty. This program allows Citizens to control the contractors making the repairs, preventing AOB fraud.

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