Heritage Insurance seeking hefty rate hikes,
blames claims fraud
Article Courtesy of The Orlando Sentinel
March 5, 2018
Heritage Property & Casualty, one of the state’s
largest homeowner insurance companies, is seeking double-digit rate
increases for new and renewing customers this year.
It’s part of a storm of large rate increases by insurers throughout the
state. Industry officials blame insurance fraud tied to the “Assignment
of Benefits” crisis. They add that further rate hikes stemming from
Hurricane Irma last year will start hitting consumers this summer.
Heritage’s increases, if approved, will affect tens of thousands of
customers throughout the state — including most of the 92,200 former
customers of state-run Citizens Property & Casualty assumed by Heritage
through the state’s “takeout” program.
Those customers, called “Select” policyholders by Heritage, would see
rates increased by an average 14.5 percent beginning May 1, according to
the Clearwater-based company’s rate filings with the Florida Office of
Insurance Regulation. The agency has final say on whether they will be
Also affected would be 60,521 consumers who weren’t acquired through the
Citizens takeout program — who Heritage calls “Preferred” policyholders.
They would get a statewide average 14.2 percent increase upon renewal
after July 1.
At the end of September 2017, Heritage had 41,658 homeowner policies in
the tricounty region — down from 49,658 two years earlier. The company
stopped writing new policies in the region in 2016 because of the claims
crisis and later resumed writing only to a select few customers.
Responding to questions by email, Heritage CEO Bruce Lucas said the
latest rate increases are a direct result of Assignment of Benefits
abuses — a claims cost driver that insurers say begins with repair
contractors convincing policyholders to sign over the right to directly
bill insurers for repairs made to their homes.
Contractors then do unnecessary work, submit inflated invoices to
insurers and — working with about a dozen mostly South Florida-based law
firms — bombard the insurers with lawsuits in hopes that plaintiffs win
quick settlements and attorneys collect fat legal fees, insurers say.
“Assignment of Benefits fraud is costing homeowners over $1 billion
annually,” Lucas said. “Every insurer is raising rates across Florida
because AOB is the largest fraudulent scam impacting Florida in the
history of the state.”
Contractors and attorneys counter that they file suit when insurers
underpay or refuse to pay fair settlements for their work. Several
contractors recently told state lawmakers that insurers deliberately
become adversarial when they learn a policyholder has enlisted
third-party assistance by signing an AOB with a contractor, or hiring an
attorney or public adjuster to help with their claim.
According to a report from the Florida Justice Reform Institute, the
number of insurance lawsuits with an AOB increased statewide from 82,263
in 2015 to 129,781 in 2017.
Yet, efforts to find a legislative solution have failed for five
straight years amid fighting between the insurance industry and
plaintiffs attorneys. This year’s session looks no different, as
compromise has eluded the two sides with just a week to go before
lawmakers go home.
Edie Ousley, vice president of public affairs for the Florida Chamber,
which sides with insurers in the standoff, said the Heritage rate
proposals come as no surprise.
“For lawmakers who don’t think AOB reform is needed, this should be
another wake-up call that something must be done,” she said in an
Companies that have imposed steep rate increases on their customers over
the past year include People’s Trust (16 percent), Citizens (6.7
percent), Southern Fidelity (14.6 percent), State Farm (9.5 percent),
and Castle Key (10 percent).
While South Florida is considered the worst area of the state for AOB
abuses, Heritage’s rate filing includes requests for large increases in
territories outside of the tricounty region, including, for CItizens
takeout customers, 25 percent hikes in parts of Hillsborough, Brevard,
Escambia, Martin, and Okaloosa counties. Increases approaching 25
percent are sought for parts of Pinellas, Sarasota, and Indian River
Lucas said those rate-hike requests reflect the spread of claims
assignment abuses throughout the state.
A majority of Heritage’s former Citizens policyholders in South Florida
would see increases ranging from 13.8 percent ot 15.5 percent.
Average requested increases for tricounty homeowners who weren’t
acquired through the Citizens takeout program range from 13.8 percent to
Statewide, about 17,425 condo owners acquired from Citizens would get
rate increases averaging 7.1 percent. The company’s 8,000 mobile home
owners would pay an average of 13.8 percent more, and owners of 17,900
rental homes would pay 14.9 percent more for dwelling/fire coverage.
Lucas said Heritage’s pending rate increases do not reflect expected
hikes for costs of reinsurance that insurers must have in place before
the June 1 start of hurricane season. Reinsurance costs for Florida
insurers are projected to increase as a result of losses paid to victims
of Hurricane Irma, and that will trigger a separate round of rate hikes
for consumers, he said. “Reinsurance [costs] are going higher and rates
will move higher as a result,” he said.
Dulce Suarez-Resnick, vice president of sales and marketing for
Miami-based agency NCF Insurance Associates, said she expects flood
insurance premiums to increase beginning in October.
She also noted that auto insurance rates are rising 15 percent ot 25
percent for drivers with no tickets or accidents. “I don’t know how
we’re going to be able to afford insurance in South Florida,” she said.