Each year, FAIA's advocacy staff develops succinct summaries of insurance-related issues to help lawmakers, the media, and the public better understand these often-complicated insurance topics. Here are the topics for the 2016 Legislative Session:
Assignment of BenefitsConfidentiality of Citizens' Policyholder InformationExporting Commercial Residential Policies to Surplus Lines MarketUnclaimed PropertyRide Sharing Insurance GapsFair Claims Settlement
PROBLEM: Assignment of Benefits
(AOB) abuse, which occurs when unscrupulous vendors file inflated claims with
insurance companies and then threaten to sue if the claim is not paid, is
driving up the cost of property insurance premiums in Florida.
BACKGROUND: In residential property
insurance, AOB occurs when a policyholder has a loss and signs a contract with
a third party to remediate the damage. The contract also provides for
forfeiture (assignment) of the proceeds (benefits) of the homeowners insurance
policy to a third-party remediator, often a water extraction firm or roofer.
water claims represent over 50 percent of total non-catastrophic claims, let’s
use one for example. A cracked water pipe floods a home. A plumber fixes
the leak and refers the homeowner to a water extraction company, which tells
the homeowner a contract must be signed before work can begin. The homeowner
often doesn’t know about the AOB provision or doesn't understand its
implications. The insurer is billed $12,000, but knows that extractions for a
comparable house typically run about $3,500. It investigates or attempts to
negotiate, but the mitigation company files suit and threatens to put a lien on
the insured’s home.
far too many situations, the claim is paid (since attorney fees are in addition
to the claim in such situations and costs mount quickly), but the homeowner is
left with an incomplete job, shoddy workmanship, and no recourse.
SOLUTION: Senate Bill 596 by Sen. Hukill and House Bill 1097 by
Rep. Caldwell defines what constitutes a valid assignment of benefits.
Legislators also should consider consumer protections such as requiring
estimates by contractors and the right for the consumer to rescind the
CALL TO ACTION: Support SB 596 and HB 1097.
Download a PDF version
PROBLEM: Policyholder information
released by Citizens Property Insurance Corporation to third parties under
circumstances specified in current law is often used by other insurance agents
and insurers to solicit policies that by law are owned by the Citizens agent of
BACKGROUND: Current law allows Citizens
to share confidential underwriting and claims files with an insurer that is
developing a Citizens takeout plan. In addition, Citizens may make specified
policyholder information available to any general lines agent as long as the
agent retains the confidentiality of the information received. In many cases,
the agent uses that information to directly solicit policyholders. Florida
Statutes expressly grant ownership and exclusive use of expirations of Citizens
policies to the Citizens agent of record. The solicitation of these
policyholders clearly contradicts the ownership rights granted to Citizens
SOLUTION: While not restricting the
use of Citizens policyholder information by other agents and insurers for the
purpose of developing takeout plans or analyzing the risks for underwriting in
the private insurance market, Senate Bill 1630 by Sen. Flores and House Bill 931 by
Rep. Passidomo prohibits the direct solicitation of Citizens policyholders by
agents who request and receive confidential policyholder information.
Support SB 1630 and HB 931.
PROBLEM: The law requiring a
diligent effort form for exportation of commercial residential risks
(condominiums) to the surplus lines market does not align with marketplace
realities, is haphazardly enforced, and doesn’t serve the best interests of the
sophisticated commercial residential customer. The law also sets traps for
agents, who risk investigation and enforcement action if they act in accordance
with their customer’s wishes.
BACKGROUND: Current law prohibits
agents from securing insurance coverage for commercial residential property
through a surplus lines insurer if the risk is already covered or could be
covered by an admitted insurer. Before agents can export a policy, they are
required to complete a diligent effort form that shows rejection of coverage
from at least three admitted insurers, even though the commercial residential
customer in many cases is looking specifically for coverage in the surplus
lines market, where better coverage is sometimes available at a better price. A
customer will typically seek out another agent who either does not have access
to an admitted insurer willing to write the risk, or who might not properly
execute a diligent effort form, thus allowing the policy to be exported to the
surplus lines market.
House Bill 651 by Rep. Beshears amends the law to remove the diligent effort
requirement, as is the case for most types of commercial insurance, and instead
require an agent wishing to export a commercial policy to the surplus
lines market to obtain the insured’s signature on a disclosure form. This encourages an agent to
discuss all available insurance
options with his client, including those offered by admitted and non-admitted carriers.
TO ACTION: Support HB 651.
PROBLEM: Florida Statutes do not require life insurance companies to use the Social Security Administration’s Death Master File (DMF) to find and begin payments to a deceased life-insurance policyholder’s beneficiaries, leaving too many Floridians—most of whom were not even aware a policy existed—without the financial protection their deceased their loved ones intended.
BACKGROUND: Starting in 2009, the Florida Office of Insurance Regulation discovered that life insurance companies were using the DMF to stop paying a deceased person’s annuity, but were not using the DMF to find and begin payments to a life-insurance policyholder’s beneficiaries. In some cases, when a person died and premium payments stopped, the policy proceeds were used in lieu of payment until the policy was drained of its value and no longer in force. In others, the life insurance company held the policy benefits unless contacted by a beneficiary, rather than research whether the policyholder was still living. In either instance, the practice selectively benefited the insurance company, and violates state fair trade practices.
The Florida Office of Insurance Regulation and the Florida Department of Financial Services have reached settlements with 22 life insurance companies representing 73 percent of the life insurance market. Those companies voluntarily agreed to, among other things, compare all company records against the DMF to determine whether there are unclaimed death benefits, search for those beneficiaries, and, if not found, remit unclaimed proceeds to the appropriate state authority.
The settlements have resulted in 130,651 accounts turned over to the State of Florida as unclaimed property totaling about $168 million. Of that, $45 million has been claimed to date. This number does not take into account the amount returned to those who were not aware they were beneficiaries of a life insurance policy.
SOLUTION: SB 966 by Sen. Benacquisto and HB 1041 by Rep. Hager will codify the consumer-friendly regulatory settlements and apply fair claims practice requirements to all life insurance companies in the state—ensuring that when family members take steps to provide comfort and financial protection to their loved ones by purchasing life insurance, the beneficiaries receive what is due.
CALL TO ACTION: Support SB 966 and HB1041.
Download a PDF version
PROBLEM: Regulation has not kept pace with the rapid growth of ride-sharing
services such as Uber and Lyft. As such, there’s no statute that specifically
addresses insurance coverage requirements for ride-sharing companies and/or
drivers. Until rules of the road are in place, the personal and financial
safety of consumers, passengers, and drivers is at risk.
BACKGROUND: Personal auto insurance policies (PAPs) are not intended to cover the
higher risks associated with using a car for commercial purposes, which is why
the typical standard PAP contains a “livery” exclusion that applies when the
vehicle is being rented out or used to carry passengers for hire. This
exclusion means any damages or losses sustained when the car is being used for
ride-sharing activities will not be covered. The policy also will not provide
coverage for the driver or passenger if either is hit by an uninsured or
underinsured driver, and won’t provide coverage to repair the driver’s vehicle
if it is damaged while being used for hire.
companies may have commercial liability coverage, but it’s not clear when it
applies. Does it apply when drivers have the app on but have not yet been
matched with a passenger? Does it apply after a passenger has been dropped off?
Without policymakers taking action, uncertainty about whether there is proper
coverage for injuries or damage caused by an accident will continue.
SOLUTION: Senate Bill 1118 by Sen. Simmons,
and House Bill 509 by Rep. Gaetz ensures
adequate insurance is in place to protect drivers and passengers. The
CALL TO ACTION: Support passage of SB 1118 and HB 509.
PROBLEM: Fear of being hit with awards far in excess of policy limits
forces many insurers to settle and pay claims even when the insurer doubts the
validity of the claim, increasing insurance premiums for everyone.
BACKGROUND: Under the current provisions of §624.155, F.S., any person—not
just the insured—can bring a civil action against an insurer for failure of
that insurer to, in good faith, settle a claim within policy limits.
attorneys demand policy limits in almost every case, even those where liability
of the insurer is doubtful, and the insurer usually has only 60 days in which
to investigate the claim and decide whether or not to pay. However, Florida law
does not require claimants who are not the policyholder to send a demand or
clearly state the amount of money demanded to achieve a fair settlement. The
absence of clear rules to satisfy third party claims has enabled plaintiffs’
attorneys to game Florida’s judicial system, which forces settlements and
increases the cost of insurance for everyone.
SOLUTION: Senate Bill 632 by Sen. Richter and House Bill 5 by Rep. Passidomo address the problem
in a straightforward manner. As a condition precedent to a third party bad faith claim, the insured, claimant, or someone
else acting on behalf of the claimant must send the insurer a written notice of
loss, and if within 45 days the insurer pays the lesser of the demand
amount or the policy limits in exchange for a full release of the insured, then
the insurer will not be liable for a bad faith failure to settle under the
statute or common law.
CALL TO ACTION: Support passage of SB 632 and HB 5.
AOB Video Tool:This video explains what Assignment of Benefits fraud is and how to prevent it.
Posted by Florida Association of Insurance Agents on Tuesday, March 31, 2015
This video explains what Assignment of Benefits fraud is and how to prevent it.