Will the 7th time be the charm? Industry is putting great pressure on AOB reform in 2019

The reform of the push for assignment of benefits (AOB) in the Florida Legislature of 2019 is in full swing and the insurance sector and consumer advocates have made every effort to emphasize their claim that misuse of a policyholder benefit has led to a complete influx insurance crisis in the state.

Whether their efforts will be enough this year after six years of unsuccessful reform efforts remains to be seen. Legislators are weighing legislative options, but a legislative proposal supported by the industry has already come to a standstill in the Banking and Insurance Committee Senate Committee.

The industry does not specify what its main problem is in the 2019 session.

"We remain hopeful about the process and that members of the [Florida] Senate and House will go through the different issues raised and end up on a piece of legislation that will be useful to consumers and that actually addresses these issues, "said Michael Carlson, president of the Personal Insurance Federation of Florida (PIFF ), which represents personal line insurers in the state.

The AOB problem in Florida stems from unlicensed water remediation and roofers who have homeowners who sign their insurance rights in exchange for repairs to their homes. The contractors usually work with a lawyer, impose inflated or bogus claims and prosecute insurers when those claims are disputed or denied.

Florida's lawyer's law for one-way traffic, which corresponds to the insurance sector, consumer protectors and the state police supervisor, leads to abuse of the AOB, requiring insurers to pay the bill for the inflated claims and the lawyer's fees if the insurer does not see the claim has paid for every amount.

"After six or seven years of this campaign to make changes and to look at this problem from different perspectives and lots of data, the industry has come to the conclusion that this is a home industry paid by lawyers," Carlson said.

The current remedy supported by the Florida industry and insurance agency was introduced by Florida Senator Doug Broxson, who chairs the Senate Banking and Insurance Committee. Senate Letter 122 would continue to allow policyholders and beneficiaries to collect lawyer fees under Florida's one-way lawyer, but could prevent rightholders from getting lawyer fees.

In several meetings of the Senate Bank and Insurance Committee before the start of the session, lawmakers AOB saw disputes and price data from Insurance Commissioner David Altmaier and heard stories from homeowners who were victims of AOB scammers.

They also listened to statements from contractors who claim that there is no urgent need for AOBs.

"The statement that contractors must receive an AOB [and] they have to persecute the insurance company to be paid, it does not seem to be reflected in the information about the complaints about the insurance we have at our disposal, "Altmaier told the committee on 22 January.

Altmaier said he supports SB 122 to settle the attorney fees that are the main cause of AOB abuse, which in turn increases rates and reduces consumer coverage.

"Many people will tell you that this is a problem between insurance companies and trial lawyers – [but] At the end of the day this is really a matter that affects the insurance consumers in Florida and at the moment this has a negative impact on the consumers of Florida's insurance policies, "he said.

He noted that 70 percent of the claimed claims that Citizens Property Insurance Corp. has experienced in 2018, has an AOB that is related to this.

"On the basis of this information, it seems that the purpose of obtaining an AOB for certain individuals on our market is to get the benefit of one-way costs and to start a lawsuit with our insurance companies," he said.

Citizens, the state-run insurer as a last resort, have the biggest disadvantage of the abuse of the AOB. CEO Barry Gilway warned the committee that the problem is worsening across the entire state.

"It was mainly a problem in South Florida until 2015 to 2016, but now it explodes over the state," he said.

Gilway said that the increase in the percentage of citizens by 8.2 percent for 2019 is far below the actual indication of the insurer due to costly AOB lawsuits. The insurer can not request rate increases of more than 10 percent across the entire state due to the legally required sliding path.

"What's very important to understand is that while the increase we made was 8.2 percent, the actual rate requirement – everything driven by lawsuits … 25.2 percent – that's what we need," he said. .

Altmaier underlined the ramifications of the problem if it is still not checked.

"Speed ​​increases are the best scenario that consumers can hope for without a solution to this problem.We hear from many insurance company executives who claim that the rate increases they receive are not sufficient to continue to offer their products in our state," said Altmaier.

Bill Status

Despite the testimony and agreement by lawmakers that something needs to be done, SB122 was submitted to the committee meeting on 11 February after several committee members expressed their concerns about the law, one referring to it as a "nuclear option".

Senator Jeff Brandes, a member of the law enforcement committee, has successfully tried to postpone the law in the hope that legislators could reach a consensus on how to proceed.

"There is no perfect invoice to solve [AOB] – This is a great attempt. We must support this bill. We must continue to sharpen and refine and work on this account, "he said.

He stressed to his co-legislators that he believes that something should happen this year.

"What we hear is that this is a pandemic that is slowly spreading across this state, which is not sustainable," he said.

Broxson said that SB122 was the 18th bill that had been filed since 2013, with 15 different bank and insurance chairs that were hearing the issue and no legislation addressing the issue that has passed so far.

"We're going to handle this issue this session – if we have to go through every committee meeting to investigate this problem – we will not rush through this," he told the committee at his first meeting on January 22nd. "We have to have this problem once and for all."

SB122 was not heard by the meeting of the Senate Council and the Insurance Committee on 19 February, but was added to the agenda of 4 March.

So, is 2019 the year?

The industry says it does not give up the reform.

"Despite the setback [the Senate Banking & Insurance] committee, I think we still have a better than even chance to implement meaningful reforms this year, "Carlson said.

Logan McFaddin, Regional Manager Group Regional Branch Group APCIA, said the industry is frustrated about what lawmakers need to hear to implement reforms, because clear data from the state supervisor, victim stories and contractors' expertise simply do not resonate with current legislators. "

"For some reason it will be deaf for some legislators, I think that's the most frustrating thing – it's just like what we can bring to the table that's really enough to change your mind? finger on it to try to find a solution and strategy, "she said.

However, she said that there is enough time during the 60-day session to find a compromise.

"I'm not ready to throw in the towel, and I do not think the majority of the insurance industry is," she said.

There is a possibility that reform options that have been considered during past sessions may be resumed this year, but consensus among all stakeholders is that each reform should address the status of lawyer against one-way costs.

"The current right to a unidirectional lawyer brings abuse and excessive litigation in. OIR recommends to limit the current right to one-off lawyers' fees with regard to disputes with an AOB agreement to discourage the abuse of AOB while preserving consumer protection "said Commissioner Altmaier in an e-mail to Insurance Journal.

Altmaier said that OIR will remain a vocal supporter of measures that increase consumer protection in the use of AOB agreements, monitor legislation aimed at reducing AOB abuse and continue the fight to keep consumers harmless.

"We greatly appreciate the leadership of Senator Broxson and believe that the one-way cost allowance provision handled in SB 122 should remain a central element of ongoing discussions," he said.

Florida CFO Jimmy Patronis, who oversees the ministry of financial services, will also continue the fight, legislators Jan. 22 tell that doing nothing this year is not an option.

"It is my job to ensure that we continue to pay attention and pressure on this problem and that something is done during this legislature because doing nothing is disrespectful and dishonorable to the citizens we serve, because in the end things will only go faster. we do nothing, the rates will go up, "he said.

In the meantime, Altmaier said that agent communication with OIR, carriers and their customers is essential to prevent abuse, especially in the aftermath of major disasters such as Hurricane Michael.

"We ask agents to continue communicating with OIR and DFS to express any concerns so that these problems can be resolved as quickly as possible," he said. "Through our joint efforts, communication lines can be strengthened and consumers can be better served and protected."