State Insurance Consumer Advocate (ICA), Robin Westcott, has announced she will leave the public sector behind (See NOTE#1 below) but, upon her departure she also leaves behind a set of recommendations from the Homeowners’ Policy & Claims Bill of Rights Working Group, some of which could materially lower premiums for all Floridians…if implemented!
Her potential legacy, of course, is dependent on lawmakers and cabinet members acting boldly–refining the ICA’s draft legislation (See NOTE #2 below) and supporting the good recommendations outlined in the final report released earlier this month. To a lesser extent it depends on the regulator working with lawmakers and the industry to address what we now know to be Florida’s true cost drivers.
No one has more influence on this process than the cabinet officer(s) who appoint and oversee both the consumer advocate and the insurance commissioner. A group effort is needed, including the leadership of Governor Rick Scott and CFO Jeff Atwater, if material premium savings are to be achieved.
What drives up Florida rates the most? Is it hurricanes & reinsurance, as many opine?
Listen to the testimony during Westcott’s panel. Read the final report. Read my previous blogs showing that Assignment of Benefits and Emergency Remediation Services are driving more claim inflation than any other single non-catastrophe related expense (See NOTE #3 below).
You’ll quickly understand there’s a whole lot more here than meets the eye! And, unlike hurricanes and reinsurance it’s imminently fixable.
In fact, water losses, almost all of which are inflated to some degree, are the largest single loss category for virtually every insurer, especially Citizens. And, driving much of the remediation fraud is the fraud associated with Assignment of Benefits, exorbitant plumber referral fees and a complete lack of regulation and consequence for offenders of the system.
Now figure this; opportunities for AOB and remediation fraud proliferate after a hurricane. This means that, in addition to non-cat losses, they both impact catastrophe losses and thus premiums paid for reinsurance–the latter consuming somewhere between 40% to 60% of the average homeowners premium.
This is why I’m convinced that emergency remediation fraud (including roofers) and abuse of Assignment of Benefits may be Florida’s biggest cost driver(s)…bigger even than HURRICANES & REINSURANCE; neither of which we can do anything about.
It won’t be easy!
In an email sent widespread and titled “Let’s Get Ready To Rumble” lawyers enamored with the status quo are mobilizing (See NOTE #4 below). Some public adjusters will join them. Politicians may shy away from reform during an election year.
But, for those who care it should be obvious that, with the impossible exception of eliminating hurricanes, eliminating the fraud and abuse uncovered by Westcott’s working group may be the best opportunity Floridians have to materially reduce residential property premiums.
Stay tuned for more.
NOTE #1: Westcott resigned from her job effective Nov. 1 to become vice president of government affairs for the American Association of Insurance Services (AAIS) based in Wheaton, Ill. AAIS is a member-owned, non-profit national insurance advisory organization that provides specialized services to property and casualty insurers.
NOTE #2: concomitant with the final working group report the ICA released draft legislation implementing the recommendations. It’s a noble start, but…needs a lot of work. Also, perhaps in the interest of consensus, it doesn’t address every suggested reform. Further, other issues such as Florida having the highest public adjuster contingency fees in the country, weren’t even discussed. None the less, elements of the report and draft bill are a good starting point for those truly interested in lowering costs.
NOTE #3: for talking points, read my March 23rd post titled; “Another Rip-Off…Assignment of Benefits” showing that AOB fraud cost just one insurer over $1.7 million a year in inflated claims. Then read “Emergency Remediation Fraud & the ICA Working Group” showing inflated water damage claims alone drive up annual costs by at least $150,000,00. Follow the links to previous blogs.
NOTE #4: Cohen-Battisti a prominent plaintiff’s law firm declares “Let’s Get Ready To Rumble” while promoting $2500 memberships in FLARS (Florida Association of Restoration Specialists) in order to: “Organize a powerful campaign to advocate upholding the Assignment of Benefits and prevent the limits and bans…the insurance company is pursuing.”
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