Lack of AOB Reform Likely to Put Pressure on Rates and Availability
After only limited committee discussions during the 2017 session, the Florida legislature failed to adopt reforms to this state’s “assignment of benefits” problem. The Florida Office of Insurance Regulation and Citizens Property Insurance Corporation offered substantial testimony before the legislature regarding the nature of the problem, steps the legislature could take to fix the problem, and consequences of failing to address the issue. Specifically, the OIR testified that in the absence of meaningful reforms, residential property insurance rates will increase by ten percent per year for the foreseeable future. Compounded over several years, rate levels in Florida are expected to be substantially higher five years from now than they are today.
Premium increases are only one adverse impact of failing to address the AOB issue. Policyholders in south Florida, and increasingly in other areas of the state, will find fewer choices of insurers willing to take on new risks. In addition, if prices in the admitted market go up faster than Citizens’ rates under its statutorily-mandated cap, policyholders increasing will find Citizens to be the more desirable, or sometimes only, option.
Unfortunately, the AOB problem is attributable to a small number of actors but is affecting policyholders throughout the state. With the problem not being addressed in the 2017 session, we can expect the adverse effects on rate levels and availability to extend at least another year.