Water-damage claims criticized
Citizens CEO says claims out of control; others back consumers.
ORLANDO — The CEO of Florida’s biggest insurer called abuses of water-damage claims in South Florida “ridiculous” Tuesday as opponents geared up to fight what they called a misleading bid to curb consumer options.
Up to 93 percent of water-damage claims in Miami-Dade County are now represented by an attorney or public adjuster, said Barry Gilway, CEO of state-run Citizens Property Insurance Corp. He spoke at a Florida Chamber of Commerce insurance summit in Orlando with a heavy focus on 2016 changes insurers want legislators to make.
“It’s ridiculous,” Gilway said. “You can’t manage your business on that basis. Something has to be done.”
Others not at the conference warned of efforts to “low-ball” consumers and limit their choices.
“This is a set-up done at the urging of the insurance industry to help push a bill the industry wants that would eliminate an insured’s ability to assign benefits to contractors,” said Fort Lauderdale attorney Gary Farmer. “The industry knows that without the experienced billing department for the contractors representing the insureds’ interests, they will be able to low-ball consumers and save millions in claims payouts.”
Similar bills have died the past few sessions, Farmer said, “but they are going to come back again this year and use this Citizens rate hike as justification.”
Citizens officials make the case that third parties are abusing the system and driving up costs for customers. The average cost of water claims, such as from a broken pipe, has jumped from $7,800 to $14,000 in about two years in Miami-Dade, they said.
“What we are talking about is a problem that directly swings the premium from a decrease to an increase,” said John Rollins, the chief risk officer for Citizens.
During rate proceedings, Florida insurance consumer advocate Sha’Ron James also questioned other possible factors in the rate increase. One is whether the company’s spending of hundreds of millions of dollars annually on offshore reinsurance — back-up coverage it did not buy five years ago — had left the company “over-reinsured.”
Despite a decade without hurricanes and a slight overall rate decrease the previous year, Citizens asked for a 2016 rate hike of 3.2 percent, including 4.6 percent in Palm Beach County. Water-damage losses were the primary reason company officials emphasized. Regulators approved the request with minor tweaks.
The industry turns again to the state Legislature after setbacks in the courts.
The 1st District Court of Appeals denied Ormond Beach-based Security First Insurance Co.’s motion for a rehearing. The company sought a change to its insurance policy language that it said would have created greater protection against misuse of the assignment of benefits agreement.
“Unfortunately, there is nothing left that we can do to move our request forward in the judicial system,” said Melissa Burt DeVriese, Security First general counsel and director, in a statement Tuesday.
The ruling said “it is for the legislative branch to consider this public policy problem, not the courts.”