The significant rise in flood insurance rates in South Florida is being driven by water loss claims and assignment of benefits, a new report from the state’s Citizens Property Insurance Corporation suggests.
Released this week, the analysis was an answer to a mandatory data call from the Florida Office of Insurance Regulation. It found that the frequency and severity of claims filed under an assignment of benefit is growing at a fast clip, exacerbating already high insurance rates for residents.
Actuaries for the state-run Citizens analyzed data for both litigated and non-litigated claims, with or without an assignment of benefits, under which homeowners give over control of their claim to water remediation companies, contractors or attorneys.
According to the analysis, assignment of benefits cases were almost twice as expensive on average and more likely to lead to litigation. Furthermore, the average litigated claim cost more than double that of a non-litigated claim, driving up average claims costs to more than four times than of a simple non-AOB, non-litigated claim.
Responding to the results, the insurer called for a change in the AOB system.
“Consumers are losing control of their claims by transferring their authority to contractors and attorneys under the current assignment of benefits system,” Chris Gardner, chairman of Citizens’ Board of Governors, said in a statement.
“This analysis shows clearly that AOB is raising water claims losses. Those higher costs are paid by all policyholders. We have a dual obligation of protecting our policyholders while keeping premiums as affordable as possible.”
The analysis comes in the wake of earlier studies, which also suggested that water loss claims were leading to higher insurance rates in south Florida – particularly in Palm Beach, Broward and Miami Dade counties. Citizens raise its 2016 rates by an average of 8.1% for Miami Dade customers, for example.
“Water claims are being filed at double the rate of just two years ago in the Tri-County area and triple the rate of two years ago across the rest of the state,” the insurer said.
The full analysis from Citizens can be found on the carrier’s website.
