Assignment Of Benefits – A Warning To Insurers Everywhere
Assignment Of Benefits – A Warning To Insurers Everywhere
In some circumstances, insurance policies put in place by a particular state can cause more harm than good and they should be reviewed, updated or disregarded. In the case of the Assignment of Benefits rule, abuse of the system is costing homeowners thousands of extra dollars and increasing rates across the state.
What Is Assignment Of Benefits?
An Assignment of Benefits, or an AOB, is a document signed by a policyholder that allows a third party, such as a water extraction company, a roofer, or a plumber, to “stand in the shoes” of the insured and seek direct payment from the insurance company.
AOB’s have been an integral part of Florida’s insurance marketplace for over 100 years, and are mostly used for water and roof claims throughout the state.
Many homeowners are not complicit with fraudulent claims, and instead are happy to hear from a contractor that can fix their home or property after a storm or other damage. They are quick to sign over any insurance benefits they may receive later, in return for having the work completed quickly.
Why Is The Assignment Of Benefits Unsustainable?
What homeowners may consider being a “quick-fix” solution for repairing damage to their property, is actually full of legal loopholes and often unread terms and conditions. Buried in the contracts they sign is usually a clause whereby the homeowner or consumer agrees to sue to the insurance company if it is unwilling to pay the vendor the full price of the work that has been undertaken.
As the litigation rolls on, the contractor’s solicitors charge heavily for their work, and they often collect hundreds of dollars in fees if the court awards so much as a dollar above the insurance companies initial settlement figure.
When this happens, the insurance company is made to pay out thousands of dollars per claim, which in turn pushes up insurance premium prices for homeowners in Florida. As a direct result of the “one-way” fee statute that operates in the state, contractors, vendors and their lawyers have a strong incentive to submit inflated and fraudulent claims, even if the work they undertook was substandard and overpriced.
AOB’s Lawsuits Continue To Rise
In 2000, there were less than 500 AOB lawsuits filed throughout the year. By 2016 however, there were a staggering 28,000 claims, and even more since then. The damage is caused by the pure expense of such claims, and according to the Florida Office of Insurance Regulation, the average AOB claim was around $17,000 – around 50% more than non-AOB claims.
Assignments Of Benefits – A Warning For The Florida Insurance Industry
A huge rise in assignment of benefit cases has resulted in significant increases in insurer costs and premiums. Insurers are left wide open to fraudulent claims, making them more likely to increase the cost of premiums for everyone they insure, in order to claw back the money lost in less than genuine cases.
The Assignment of Benefits crisis in Florida should be seen as a serious warning to insurers that they need to safeguard themselves. An outdated idea that is open to abuse no longer offers any real benefits to genuine claimants and the insurance industry as a whole.
If you would like advice on purchasing insurance to cover damage to your home, speak to the professionals at The Sena Group today on 561-391-4661.
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The Sena Group
6501 Congress Ave., Ste. 100
Boca Raton, FL 33487
561-391-4661
