Michael Moline
Florida’s property insurer of last resort fears lingering damage from Hurricane Hermine — in the form of third-party claims officials and business leaders blame for escalating premiums.
Thus far, of 837 Hermine-related insurance claims, third-party public adjusters filed seven — and five involved assignment of benefits agreements, or AOBs, staff members told a Citizens Property Insurance Corp. board committee Tuesday.
These are contracts through which homeowners assign their claims to contractors or attorneys in exchange for quicker repairs. They can lead to inflated repair costs, expensive litigation, or even fraud, according to Citizens, and were blamed for a 6.4 percent increase in premiums, effective Feb. 1.
“What’s going to happen is, we’ll start to see the AOBs and [attorney] representation trickle in as time goes on,” said Jay Adams, chief of claims for Citizens. “We have reporting set up to monitor that.”
Most such agreements have involved non-storm water claims like burst pipes, but that’s likely because Florida hadn’t seen a hurricane since 2005, said Steve Bitar, Citizens’ chief of underwriting.
“The opportunity has not presented itself,” Bitar said. “If we were to see some significant hurricane activity, like we did in 2004 and 2005, I believe the trend would be away from water and to wind.”
Citizens has been trying to discourage customers from signing AOBs through policy provisions requiring that its adjusters get first crack at inspecting damage. The insurer has written to policyholders directly, cautioning against AOBs, and has distributed postcards with warnings in Spanish to agents for distribution to customers who primarily speak that language.
“We want to get out in front of representation,” Adams said. Post Hermine, “we spoke to every insured we have on the commercial site and asked them did they want to report a claim. We also explained the calendar year and hurricane deductible to them to let them know if there’s a substantial storm, we really do need to come out and write estimates.”
In other action, Citizens staff addressed complaints that a major insurance agency in South Florida has been improperly using the insurers’ customer lists to solicit business. Although Citizens used to share this information, it has warned agents that, as of July 1, they may no longer use it in marketing.
They did not identify the agency.
“No agency should be securing these lists for the direct purpose of soliciting to move out of that agency’s [Citizens’] book to the private market,” Bitar said.
Those that do could lose their ability to sell Citizens policies or, in egregious cases, face discipline by state regulators, he said.
Of course, Citizens has been encouraging policyholders to switch to private insurers, a process known as “depopulation.” The Florida Office of Insurance Regulation is projected to approve about 500,000 such switches this year — down markedly from 2015, when the office approved 1.4 million. That’s primarily because previous rounds of depopulation left Citizens with fewer customers. “The pool is smaller,” market services director Adam Marmelstein said.
Finally, staff members addressed reports that banks have been demanding certification that mortgage applicants’ insurers will pay full replacement costs should their homes suffer damage — documents Citizens is legally barred from providing.
Citizens hopes to contact lenders to explain the legal situation, said Carl Rockman, director for agent services. Meanwhile, the insurer does provide “debt pages” to policyholders who have paid up and whose policies are fully documented. “Which would more than satisfy the lender,” he said.
