The Florida House of Representatives has passed legislation designed to tackle the state’s assignment of benefits (AOB) issue, increasing the likelihood that needed reforms are enacted into law this year.
At the same time, the House passed a bill that looks to increase the reimbursement of loss adjustment expenses (LAE) that are covered by the Florida Hurricane Catastrophe Fund (FHCF).
AOB cases related to property insurance increased significantly from 2013 to 2018, a period when hurricane activity wasn’t that high.
According to the Insurance Information Institute (III), in the year 2000 there were only 1,300 AOB lawsuits in Florida. However, by 2013 the number of AOB lawsuits had risen to 79,000 and the abuse has persisted, with a 70% increase to almost 135,000 in 2018 by November.
The rise in AOB abuse has driven higher homeowners’ insurance premiums at a time of benign hurricane activity, and the issue has been exacerbated by 2017’s hurricane Irma, and hurricane Michael in 2018. Legislation aimed at reforming AOB in Florida has failed to pass previously, but the House passage of H.B. 7065, increases the chance of this law being enacted in 2019.
The bill targets numerous elements, including fees to attorneys and the obligations of all parties involved in an AOB, and looks to provide “requirements and limitations for property insurance assignment agreements…”
The bill enables insurers to offer AOB-free policies, and it’s hoped that over-time, it will eradicated the AOB abuse issue that has severely impacted the state over the last decade.
Now passed, the bill is with the Senate, which has been urged by the industry to adopt it quickly.
HB 301 was also passed by the House, specifying the “required reimbursement of loss adjustment expenses in reimbursement contracts between the State Board of Administration and property insurers under the Florida Hurricane Catastrophe Fund on or after a specified date…”
Under the bill, the insurer’s loss reimbursement covered by the FHCF would increase from 5% to 10%, which could result in lower premiums for consumers, and is expected to be beneficial for the insurance market.
Progress is clearly being made and the state appears both committed and focused at solving its AOB issue. Both bills are now with the Senate, with the possibility of being enacted into law this year.