Florida on Alert for AOB Abuse as Irma Recovery Begins

Insurance Journal – By Amy O’Connor | September 13, 2017

As Florida residents return home after being evacuated by Hurricane Irma, the pressure is on the insurance industry to keep a bad situation regarding assignment of benefits abuse in the state from getting worse.

Florida regulators, carriers, industry trade groups and lawmakers are all echoing the same advice to policyholders: now’s the time to contact your agent or insurer and file claims.

“CFO Jimmy Patronis and Insurance Commissioner David Altmaier encourage Floridians to be prompt in notifying their insurance companies and cautious of repair deals that sound too good to be true,” the Florida Office of Insurance Regulation alerted consumers in a statement released Tuesday.

While Florida was spared the worst-case scenario by Hurricane Irma in terms of the storm’s strength, the state still suffered significant damage from wind and coastal flooding. Agents and carriers are just starting to deploy resources to affected areas, and stakeholders say timing will be of the essence as “bad actors” will be on the prowl for homeowners willing to assign to them the right to obtain insurance benefits to deal with damage to their homes.

“All consumers need to be on alert as they recover from Irma for fraudulent schemes and assignment of benefit scams so they don’t unknowingly sign away their rights,” said Chris Gardner, chairman of Citizens board of governors. “If unsure, agents are prepared to advise you and guide you through the claims process.”

The assignment of benefits, or AOB, scams that the industry is warning against stem from certain contractors and attorneys cashing-in on homeowners who are dealing with a water loss, most commonly a burst pipe or roof leak. The “bad actors,” as they have been dubbed by the industry, use an AOB to acquire the homeowners’ insurance benefits, file inflated claims, and then pursue lawsuits against insurers when those claims are disputed or denied.

Because of Florida’s one-way attorney fee statute, insurers are left footing the bill for the inflated claims and the attorney fees. Carriers across the state have seen an increase in litigation because of these inflated claims, but Citizens, the state-run insurer of last resort has borne the brunt of the abuse. It reported an average of 693 lawsuits per month between Jan. 2017 through July 2017. As of July 31, 2017, the company had 10,666 lawsuits pending – a 33 percent increase compared to the same time last year – with 93 percent of those lawsuits coming out of South Florida.

Escalation Concern
Many in the industry have worried that a significant catastrophe event will escalate the assignment of benefits abuse for Citizens and the private insurance market. Regulators aren’t wasting any time getting the word out to consumers to be wary of anyone asking them to assign benefits, and have sent out numerous communications and created an information site on how to file claims and an AOB Fact Sheet. OIR encouraged agents to use these resources to educate their clients.

Christopher Hackett, senior director for Personal Lines Policy for the Property Casualty Insurers Association of America (PCI), said agents will play an important role in informing policyholders about the risks associated with AOB.

“Policyholders should understand they are relinquishing rights under their policy to a third party. A vast majority of insurance claims can be quickly and fairly settled without the involvement of a third party,” he said. “Third parties enter the picture for a reason – and it may not be the right reasons.”

Jeff Grady, president of the Florida Association of Insurance Agents (FAIA), said his group hadn’t yet heard of the abuse occurring related to Irma, but he expects it won’t be long as evacuees return to their homes, inspect damage and begin efforts to repair damage.

Most of the damage he’s heard of so far is coastal flooding and some structure damage from wind.

“That likely means many property losses will be uncovered… [either] below the wind deductible or no flood coverage,” he said.
Grady added that the early advisories from regulators are important in helping to stem fraud and abuse, and FAIA agents are doing their part to educate their customers.

The Florida Property & Casualty Association (FPCA), which represents Florida domestic companies, said it echoes the warnings and advice issued by Florida regulators regarding ways to avoid scams and fraudulent contractors.

“The most important guidance our association has stressed is for homeowners to contact their agent and/or insurance company first, especially before signing anything. Agents should advise the same,” said William Stander, FPCA executive director. “Our members are ready to go and working diligently to handle claims and make customers whole again.”

The Florida Chamber and the Consumer Protection Coalition, a group of stakeholders formed to fight AOB abuse, also encouraged agents to join the chorus of those educating Florida homeowners and auto owners so they know that they don’t have to sign an AOB to get much needed repairs made.

“We’re working to protect Floridians from AOB scams, and the more Floridians know and are informed, the better we can protect them,” said Florida Chamber of Commerce’s Vice President of Public Affairs Edie Ousley.

Ousley said agents can visit FightFraud.Today or FloridaChamber.com/Hurricane for more details on how they can help their clients.

Scott Johnson, president of consulting firm Johnson Strategies in Florida currently working with FAIA, said agents are making their way back to their own offices, executing their catastrophe plans, fielding calls, assisting with “First Notice of Loss” completion, explaining how deductibles work and explaining flood insurance.

He said FAIA has been advising agents to “never recommend a vendor that uses an AOB,” because most reputable vendors use an approach called “direction to pay” which eliminates the need for the homeowner to front money but does not usurp all of their rights and benefits.

“There is always a water extraction firm, roofer, rebuild contractor available in every town in Florida that will do a good quality job, guarantee their work and not require an AOB be signed,” Johnson said.

FAIA also entered into a partnership with a statewide water mitigation firm that doesn’t use AOBs and is endorsed by carriers.

“Hopefully agents are following FAIA advice in this regard and recommending [the firm] whenever they’re in doubt about what a carrier might prefer them to do,” Johnson said.

Managed repair programs became a sore subject for some in the restoration industry early in the summer when Citizens announced it was seeking approval from Florida regulators for a $10,000 cap on non-weather-related water damages for clients who chose not to use a Citizens-approved contractor. They argue policyholders were being penalized for using their own contractors.

But the insurer said it was doing what it had to do to slow losses from AOB claims.

“We can’t sit back and do nothing while we dip deeper into reserves,” said Citizens CEO Barry Gilway in an open letter to Insurance Journal in July. “These new initiatives will allow us to be there for our customers when they need us most while helping to lower costs for all our policyholders and the people of Florida. The bottom line is that policyholders who Call Citizens First after a water loss can be assured prompt, hassle-free emergency services at no cost, and warrantied permanent repairs to get them quickly back on their feet.”

 

View this article online: http://www.insurancejournal.com/news/southeast/2017/09/13/464047.htm

Congress Renews Effort to Provide Private Market Alternative to NFIP

Best’s News Service via Bestwire – March 08, 2017 03:42 PM

WASHINGTON – The effort in Congress to provide a marketplace alternative to the National Flood Insurance Program has begun anew, as legislation that passed the House last year has been reintroduced in the House and Senate.

The move is being greeted enthusiastically by insurance industry groups.

Sens. Dean Heller, R-Nevada, and Jon Tester, D-Montana, along with Reps. Dennis Ross, R-Florida and Kathy Castor, D-Florida, have re-introduced the Flood Insurance Market Parity and Modernization Act. The bill passed through the House unanimously last year (Best’s News Service, April 29, 2016).

Ross said property owners currently are limited by regulatory barriers to buying NFIP products that are more expensive than private market policies. He said the bill would remove excessive restrictions and give states flexibility to license and regulate private flood insurance. “More choices and increased marketplace competition means better coverage, more innovation, and more affordable policies for homeowners,” Ross said.

The American Insurance Association welcomed the bill’s reintroduction. Tom Santos, AIA vice president, federal affairs, said in a statement allowing private flood policies to meet the NFIP’s mandatory purchase requirement “takes one step toward fostering a private flood insurance market, which will provide consumers additional options to insure against losses from flooding and reduce taxpayer exposure.”

The Property Casualty Insurers Association of America urged Congress to pass the bill. “PCI supports the viability of a competitive private insurance market for the benefit of consumers and insurers, and believes that good insurance supervision recognizes the wide variety of property-casualty business models that can increase private competition,” said Nat Wienecke, PCI’s senior vice president, federal government relations, in a written statement. “This commonsense legislation clarifies the intent of Congress that private flood insurance should be an option available to homeowners.”

Jimi Grande, the National Association of Mutual Insurance Companies senior vice president for government affairs, said in a statement the legislation “takes a small but important step” in the reform process by increasing consumer choice. “Today’s legislation opens the door for more competition in the flood insurance marketplace but Congress must take significant steps toward charging actuarially sound rates if it wants to foster a private market for flood insurance,” Grande said.

The Independent Insurance Agents & Brokers of America said the bill allows private flood insurance to meet NFIP continuous coverage requirements. Policyholders can obtain NFIP coverage without losing any grandfathered status if they leave the program for private market coverage but find the private coverage is inadequate. Charles Symington, Big I’s senior vice president of external and government affairs, said having an active insurance policy — regardless of whether it was through the NFIP or the private market — should be considered continuous coverage for purposes of NFIP rating requirements.

The Big I also said the bill clarifies that a private flood policy can support the NFIP mandatory purchase requirement for flood insurance and allows state regulators to determine what private market insurance is acceptable.

While Symington said he supports a reformed NFIP and a slow increase in private market involvement, he said without a viable private market alternative for policyholders, the Big I will push for NFIP reauthorization before it expires on Sept. 30, 2017.  (By Thomas Harman)

 

Insurance Groups Back NAIC Panel Draft Proposal Seeking Long-Term NFIP Reauthorization

Best’s News Service via Bestwire – August 29, 2016 11:51 AM (Partial Post)

SAN DIEGO – Insurance groups back proposals drafted by a National Association of Insurance Commissioners’ panel to reform the National Flood Insurance Program, including a long-term
reauthorization and changes to allow insurers participating in the program to sell private insurance outside the NFIP.
The comments were in response to the NAIC’s Property and Casualty Insurance Committee’s initial draft recommendations, which could serve as recommendations to Congress when it considers
reauthorizing the NFIP, which expires Sept. 30, 2017. The NAIC is holding its summer meeting in San Diego.
The draft said reauthorization should be set for a 10-year minimum in order to avoid short-term extensions and program lapses, which create insurance and housing market uncertainties.
The draft would require the Federal Emergency Management Agency, which administers the NFIP, to eliminate its noncompete clause in order to allow companies in the Write Your Own portion of the NFIP to sell stand-alone private insurance outside of the program. The FEMA earlier this year proposed several changes to the WYO program that would make it easier to modify policy terms
(Best’s News Service, May 24, 2016).
Also, the proposal would have Congress encourage greater private flood insurance market growth to complement the NFIP in order to widen consumer choice. To that end, the proposal supports
passage of H.R. 2901/S. 1679, the Flood Insurance Market Parity and Modernization Act, which clarifies that private flood insurance meets the mandatory flood insurance requirement. The House passed the legislation, seen as an NFIP alternative, earlier this year (Best’s News Service, April 29, 2016).

08.30.16 Insurance Groups back NAIC Seeking Long Term NFIP Reauthorization

Citizens discontinues new CR Multiperil policies in Wind Pool zones

Effective July 1, 2014, Citizens may not offer new commercial residential multiperil insurance policies in the coastal account. Instead, Citizens will continue to offer commercial residential wind-only policies and separate commercial residential policies that exclude wind. Citizens may continue renewing commercial residential multi-peril policies within the coastal account that is insured by Citizens on June 30, 2014.

Ref: Commercial Residential Insurance in the Coastal Account (Section 3, amends s. 627.351(6)(b)2.a.(III), F.S.)

 

Florida House Nixes Shifting Citizens Policies to Surplus Lines

The Florida House has rejected a proposal that could shift homeowners away from the state-backed Citizens Property Insurance and into private surplus lines insurers.

The Florida Senate last week narrowly voted for a property insurance bill that would allow homeowners seeking coverage from Citizens to be shifted to a private surplus line insurance company. Surplus line companies are not subjected to the same regulations as companies based in the state.

But the House stripped out that provision from the bill (SB 1672).

Rep. John Wood, R-Winter Haven, said that the issue was dead for this year’s session.

Lawmakers have taken several steps over the last few years to try to steer people away from the state-created Citizens. Citizens was set up initially to be an insurer of last resort but it grew as Florida was hit by hurricanes and private insurers sought to limit their exposure in the Sunshine State.

Last year, legislators approved creating a clearinghouse that requires insurance agents to look at offers from private insurers before allowing someone to purchase a Citizens policy. A customer is ineligible for Citizens if one of the insurers charges premiums that are within 15 percent of Citizens rates.

The Senate bill as originally passed would have added surplus line insurers to those that could be offered through the clearinghouse starting in January.

Sen. David Simmons, R-Altamonte Springs, said last week it would give homeowners another choice for coverage. He said homeowners would be told ahead of time that the surplus line insurers are not regulated the same way as other insurers. He also noted some Floridians already insure their homes with these type of insurers.

But many legislators, especially from those areas with heavy concentrations of Citizens policies, opposed the idea.

View this article online: http://www.insurancejournal.com/news/southeast/2014/04/30/327963.htm