State can start insurance reform by getting the right numbers
Because the Legislature couldn’t agree on gambling,
Florida voters settled the issue last year in a constitutional amendment. Sort of.
The amendment requires another amendment for any new casinos. Not surprisingly, financing for the campaign came from the Seminole Tribe – which operates Florida’s only resortstyle casinos – and Disney – which long has opposed new casinos.
In theory, the tribe and Disney won big and perhaps forever. It’s hard to get an amendment on the ballot and then get 60 percent of voters to approve it. In practice, lawyers may have to work out how the amendment affects the many gambling interests.
Given the rising cost of property and car insurance and the Legislature’s repeated failures to address it, a campaign to go around Tallahassee might succeed with Florida voters. Trying to reform insurance through the Florida Constitution, however, would be like trying to kill every python in the Everglades. There are too many details.
In addition, there is blame all around. So it was unfortunate last month to hear Florida’s top insurance regulator side with the industry.
David Altmaier was responding to the Insurance Information Institute report about assignment of benefits, or AOB. That’s when homeowners assign a contractor to negotiate a claim for them.
Insurers believe that the practice creates so much overbilling that companies must raise rates exorbitantly to cover the fraud. According to the lawyers whom the contractors hire, however, third-party intervention prevents insurers from fleecing policyholders.
Altmaier called the industry’s finding “no surprise.” His office, he said, previously “identified various alarming trends.” He called assignment of benefits abuse “rampant” and “spreading across our state. If left unchecked, will serve to be one of the most destructive market trends currently facing policyholders.”
He could have been quoting from the report. The industry claims that the abuse began with the Personal Injury Protection (PIP) portion of auto insurance and has spread to homeowners insurance and now claims for car windshield and window damage.
According to the report, Florida had about 3,000 assignment of benefits lawsuits in 2013 related to property coverage and more than 9,000 in 2016. There were about 3,800 glassrelated lawsuits in 2013 and more than 20,000 in 2017. Fraud once confined to South Florida, Tampa Bay and Orlando is showing up in other regions.
“We cannot wait any longer to address the systemic abuse of AOB agreements,” Altmaier said. He will “support legislation that addresses AOB abuse and fight to hold consumers harmless." That hold-harmless pledge is the tricky part. Altmaier is relying on analysis by the industry, not an objective third party. Carriers also tend to not consider consumers when legislators propose insurance reform.
In 2012, for example, the Legislature tried to end auto insurance abuse. The bill cut billions in costs from providers such as acupuncturists, so the sponsor wanted to require cuts in premiums. After industry lobbying, the mandatory cuts became goals. Lawyers sued. Auto insurance reform remains undone.
In addition, the Legislature has done repeated favors for property insurers. Tallahassee has spared them from having cover mold and sinkhole damage, after companies complained about abuses with those claims. Yet rates keep rising as the industry complains about other abuses.
Fraud does exist. We saw that with the rings that staged minor auto accidents and set up bogus clinics to run up Personal Injury Protection costs.
With property insurance, the companies claim that contractors to whom homeowners assign benefits hire a lawyer. The contractors then inflate their charges, which the insurer refuses to pay. The lawyer sues and the insurer settles, paying too much and having to raise rates.
Yet recent history also shows consumer abuse by the industry. One company dropped policies for minor, technical reasons when homeowners filed claims. Deerfield Beach-based People’s Trust sued its policyholders when they didn’t use the company’s chosen contractor.
Reform could start with the Legislature or Gov. Ron DeSantis forming a balanced task force to make recommendations for insurance reform. Doing so would push off action, but Tallahassee has whiffed on this issue for years. And with another governor who is new to the Legislature, there’s little hope for agreement in 2019.