Assignment of Benefits Causing Increases to Florida Homeowner’s Premiums

In 2016, the term Assignment of Benefits (AOB) became a hot topic in the Florida Homeowner’s insurance industry.  If a contractor has a property owner sign an Assignment of Benefits agreement/contract, the policyholder has agreed to give up their rights pertaining to the handling of the claim and transferred that right to the contractor.  The contractor now has permission to act on the behalf of the insured to resolve any and all claim issues.

Assignment of Benefits

How Assignment of Benefits Affects Homeowner’s Premiums

A few of the problems that can occur when a policyholder signs an AOB include contractors who inflate the cost of repair work and/or replace items that could have been repaired or weren’t even damaged; starting or finishing the job without an insurance company adjustor inspecting the damage before the work began; and contractors suing insurance companies if a claim is denied or not paid in full without the knowledge of the policyholder.

Most of the focus on Assignment of Benefits misuse is related to water loss claims with the majority coming from South Florida counties.  It doesn’t take long for the consumer to feel the impact of a higher claim payout.  An individual’s claim history is recorded with the date of loss, type of loss, and the amount paid.  The probability of higher rates and, perhaps, fewer companies to quote replacement coverage in the future, can exist.  In addition, your claim history follows you, not just the property location.  Claim frequency can create an underwriting concern even when a property owner has legitimate claims.

Should you experience a loss, it is always important to take the following steps:

Step 1-  Complete proactive repairs to prevent further damage to your property.  Save your receipts for the insurance adjustor.

Step 2-  Report any loss promptly to the insurance company or your agent. This is an essential element in fulfilling your duties as the insured.  Your insurance policy provides a claim phone number with 24/7 reporting, usually towards the front pages of the policy contract.

Assignment of Benefits Effect on Auto Insurance

The AOB misuse is even impacting the auto insurance carriers, mostly with front windshield cracks or chips.  In this scenario, prior to beginning the repair the vendor has the customer sign the AOB and assures them that “We’ll take care of the rest!”  What hasn’t happened in this scenario is the insured hasn’t notified the insurance company or allowed the insurer to inspect the damage.  If the average cost of a windshield replacement is $300 and the vendor bills $1,000, the insurance company will most likely deny coverage based on not having the opportunity to inspect the damage before the repair was made.  Shortly thereafter, the vendor takes the insurance company to court and the claim settles for $25,000 which is then attached to the policyholder’s record.

As a whole, most consumers want to preserve their claims history for catastrophic loss and not be involved with vendors looking to profit from the auto/property owners’ misfortune.  Please contact your Wallace Welch & Willingham Personal Advisor or the insurance company directly when you suffer a loss.

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