Crisis? Top Fla. insurer says cost of
controversial claims is falling
Article Courtesy of The Palm Beach Post
March 1, 2017
Florida property insurers are telling legislators one
thing: tough new laws are needed to address a crisis in claims where a
third party such as a contractor represents customers.
But to stock analysts, the state’s largest insurer and the biggest in
Palm Beach and Broward counties said this: The company’s average cost
for such claims has been falling. For two years.
OK, but hasn’t there been an explosion of these
claims, involving what is known as “assignment of benefits”?
“We saw a little bit uptick in frequency, nothing major,” Universal
Property & Casualty Insurance Co. CEO Sean Downes told analysts on a
fourth-quarter earnings call Wednesday. “But the severity is down.”
Separating genuine problems from hype to influence legislators not been
Demotech Inc. has warned 57 Florida insurers are under
review and an unspecified number could see lower safety
grades in March following 2016 storms and continuing
assignment of benefit [AOB] concerns.
That has ignited fears of how mortgage lenders will treat loans at
properties protected by lower-graded insurers. U.S. Sen. Bill Nelson
urged federal officials Tuesday to take any actions necessary to prevent
a “disaster” if mass numbers of Florida homeowners land in default.
Fannie Mae and Freddie Mac require borrowers to buy insurance from
companies with at least an A rating, Nelson said. If several get a B, he
said, thousands of homeowners “could suddenly find themselves in default
on their home loans.”
For its part, Fort Lauderdale-based Universal has more than 572,000
policies statewide, almost 100,000 more than No. 2 state-run Citizens
Property Insurance Corp., according to state records.
In 2014, Universal’s average AOB claim for a standard HO-3 homeowner
policy cost about $21,000, Downes said. In 2o15, it was around $19,400
and is expected to be about $19,000 for 2016, Downes said. Why? In part
because Universal is getting to the claim “with a fast-track team,” he
Property insurers say AOB abuses are causing higher rates in South
Florida and require a legislative fix. If attorneys get involved, costs
can skyrocket, they say.
In opposition, contractors and attorneys say some proposals are fine —
such as notify the insurance company quickly — but others go too far to
block consumer rights to representation or gut laws allowing winning
attorneys to collect fees.
“This is an attempt to keep high profits and raise premiums,” said
Nicole Vinson, a Tampa attorney who sues insurers. “The carriers could
easily remedy any improper suits by winning the court battles.”
Downes made clear to analysts he sees a problem and a need for
legislative action, but said his own company was taking what steps it
Last year, Universal proposed a regionwide rate increase of 8.1 percent
for homeowners across South Florida including Palm Beach County, citing
AOB among the reasons. Universal consultant Kenneth L. Leonard Jr. said
“increasing trends in the Tri-County region” create “additional
uncertainty” not “captured through techniques traditionally followed to
develop individual territory indications.”
But regulators questioned the vague, blanket justification and Universal
withdrew the request.
For next year, Downes said a rate increase was likely but he did not
specify how much.
What is “assignment of benefits”?
Example: A pipe breaks in the middle of the night.
The homeowner calls a company to clean things up and fix damage. The
vendor may tell the consumer I’ll do the work and deal with the
insurance company for you if you sign a form that assigns the insurance
benefits to me.