A strained insurance environment has been stoked by the influential and commonly misguided use of AOBs in Florida, according to analysts at AM Best.
Some contractors have solicited the transfer of rights from insureds and subsequently inflated repair costs, all while using the legal system to their advantage.
AM Best says that for several years the Florida property insurance market has been plagued by underhanded behavior that has led to elevated loss and litigation costs, higher insurance rates, and shifting coverage availability throughout the state.
In response, several members of the Florida Association of Insurance Agents marched on the state capitol in March, calling for change.
A month later, the calls for reform were heard, with approval of House Bill 7065 and Senate Bill 122. Governor Ron DeSantis signed the house bill into law on May 23, with all provisions to take effect on July 1.
AM Best says the bill addresses several issues regarding the AOB epidemic and could materially improve operating performance and loss reserve development as they relate to the issue.
Much of the bill addresses the need for more open communication and enforcement of responsibilities for all parties involved.
Assignees now need to provide accurate estimates and will be subject to examinations under oath.
Meanwhile, an emphasis on pre-suit settlements seeks to diminish the need for litigation and speed up cycle times.
Although passage of the legislation is a step in the right direction, AM Best is cautiously optimistic about its impact on insurers over time.
Given the market dynamic, AM Best says insurers have come to expect approval of significant rate increases, but with the passage of these bills, such increases may no longer be as easily obtained, as regulators expect consumer relief.
AM Best believes just how much relief will be realized remains uncertain, and that expectations of more moderate rate changes in the near term may be disproportionate.
Finally there is concern by AM Best that, in the short term, insurers may overestimate the benefit of the reform in their pricing.
