Assignment of Benefits–Real Reform!

With less than a week to go in the 2016 legislative session AOB reform is, again, dying. There’s a small chance of something limited. Banning referral fees and kickbacks for example. But… most industry lobbyists are prepared to scuttle anything limited only to referral fee’s without reforming attorney fees and AOB.

Their legitimate fear is that anything less than all three masquerades as “real” reform–making real, “real” reform impossible down the road.

Citizens, for one, is doing all it can to get it done this session.

Despite its well timed AOB report referenced in my last blog and concluding 30+% rate increases are needed in Southeast Florida, Citizens just went above and beyond with a press release warning that those predictions were substantially too low.

Though capped at 10%, rates in southeast Florida would have to “triple” to pay for Citizens “non-wind” losses through 2017. While the rest of the state would be deserving of a 10% reduction. Here’s how it shakes out.

Region                          Indication

Broward                         186.5%

Palm Beach                   165.8%

Miami Dade                   189.6%

Rest of State                   -10.1%

If lawmakers, especially those from southeast Florida, don’t step up to the reform plate, their constituents will suffer rate increases for years and years to come. Too bad. But, not just for Citizens policyholders. Everyone else, both in and out of southeast Florida, will also suffer from a growing assessment burden via Citizens 10% rate cap.

And, after their hard work depopulating Citizens, agents will be faced with more work sending policies back to Citizens…AGAIN!

I won’t name names but, a number of carriers writing in the tri-county area are now moving to avoid being victimized like Citizens.

One major writer announced it will no longer issue any new policies in Dade, Broward or Palm Beach counties. Another will non-renew existing policies if the policyholder won’t accept a “consent to rate” 40% higher than the approved rate. And, still another is non-renewing 9,000 tri-county policies.

And, I’m sorry to say I fear news like this has only just begun.

All this, combined with news that fewer multi-peril policies are being chosen for Citizens takeouts, creates the perfect storm for returning to the bad old days. Ironically, wind-only policies, those with less exposure to AOB abuse are now having the best success rate for Citizens takeout.

As Citizens finances weaken, its’ surplus wanes and its’ current reinsurance program, which eliminated assessments for the 100-year storm, will become unaffordable. Ultimately the assessment risk will climb back to the $11.6 billion mark in 2011. That’s when Citizens insured nearly 1.5 million homes and tipped the scales at a half trillion dollars in exposure.

This is why Citizens must keep fighting for reform. I believe it’s also why some others are helping.

Lt. Governor, Carlos Lopez-Cantera, sent a memo to House Speaker Steve Crisafulli and Senate President Andy Gardiner urging reform and saying “The system presently puts too much emphasis on contractors and lawyers at the expense of consumers.”

The American Consumer Institute (ACI) released another compelling media piece. This one written by Alan Daley and titled The New Magnet for Insurance Scams in Florida. Read it. Send it far and wide.

Finally, subscribers to my blog may recall that I personally undertook a search for the very best water extractor I could find–one that would never use AOB, pay kick backs or inflate losses. And, one which would always deal fairly with both consumers and insurers. I wanted to do what I could to direct agents and consumers to that, or any other statewide water extractor, abiding by such standards. The vendor I found, and now endorse, is Rytech.

Now I recommend that you watch a video from The Consumer Protection Coalition which not only features victims of AOB abuse, but…quotes Rytech CEO, Bubba Ryan, saying AOB is a “license to steal”.  Agents, I urge you provide a link to this video in all of your social media.

In my next blog we’ll look at why, regardless of AOB reform or attorney fees, regulation of water extractors is badly needed. Stay tuned.

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