Assignment of Benefits

An Assignment of Benefits, or an AOB, is a document signed by a policyholder that allows a third party, such as a water extraction company, a roofer, or a plumber, to “stand in the shoes” of the insured and seek direct payment from the insurance company. It has become prevalent in water and roof claims across the state.

AOBs have been a part of Florida’s marketplace for more than a 100 years. Loopholes in the way it is being used in the marketplace are driving up costs for homeowners across the state due to unnecessary litigation associated with certain AOB claims. According to the Department of Financial Services, there were 405 AOB lawsuits across all 67 Florida counties in 2006, and that number had risen to 28,200 by 2016.

Furthermore, the Office’s two data call reports on this issue highlighted that claims with an AOB have a much higher severity than claims without one (nearly 85%) and the frequency and severity of water claims has progressively risen since 2010. In the 2017 report, the total combined impact of changes in frequency and severity reflect an average annual increase of 42.1% in water losses, which is nearly triple the 14.2% average annual increase shown in the 2016 report.

Rising loss trends with respect to water claims are also having an impact on the profitability and rate need of many of the state’s domestic property insurance companies. In 2014, 63% of approved rate filings by the Office were for a decrease or no rate change at all. In 2016, 73% of approved filings were for rate increases.

As a result, these escalating trends and the rising use of AOBs associated with a water loss are causing tangible consumer harm. Absent an intervening change in the way AOBs are being utilized today, it is anticipated that these trends will continue to deteriorate and may cause availability issues as insurance companies struggle to control rising costs, resulting in higher insurance premiums for all Florida homeowners.

This issue is a primary legislative priority of the Office and our number one objective has been, and will continue to be, holding consumers harmless. The Office is supportive of legislation addressing attorney’s fees and providing for additional protections for consumers. To get involved and voice your support for legislative change, please contact your legislative representative.

-Via Insurance Regulation