Fraud Raises Florida Windstorm Insurance Rates
Citizens Property Insurance Corporation (Citizens) was created by the Florida Legislature in August 2002 as a not-for-profit, tax-exempt, government entity to serve as the insurer of last resort, providing windstorm damage protection to home, business and condominium owners who are entitled to but are unable to find property insurance coverage in the private market. Coverage is funded by policyholder premiums. If the company’s surplus is depleted in the wake of a particularly devastating storm or series of storms, Florida law requires Citizens to levy assessments on most Florida property-casualty insurance policyholders until any deficit is eliminated.
Jay Adams, Chief of Claims for Citizens, provided an update on the organization and the status of insurance coverage and related costs for the state of Florida. The frequency of water-related claims has increased in recent years, as has the average cost of claims – particularly for the southeastern counties of Palm Beach, Broward and Miami-Dade. The average paid claim has increased by 142 percent over the five years ended in 2016. Also, more claims are going through litigation in order to be settled.
“Due to litigation and rising claims costs, Florida homeowners will be forced to pay more and more to insure their homes over the coming years,” Adams explained. “Assignment of Benefits (AOB) fraud and abuse is a significant contributor to these rising costs. It also often leaves homeowners unable to control when and how their home is repaired and on the hook for uncovered repairs.”
Without AOB reform, annual premiums in the three counties (averaging $2,297 in 2016) are estimated to increase another 9.2 percent in 2017, and then by an additional 61 percent through 2022.
“Florida can protect homeowners by enacting sensible AOB reforms that will lessen rate increases and help shield homeowners from unscrupulous contractors and lawyers seeking to enrich themselves at their expense,” said Adams.