Water loss claims, exacerbated by assignment of benefits, are driving higher rates in South Florida and increasingly across the state, according to a just released analysis conducted by Citizens Property Insurance Corp. for state insurance regulators. The insurer says the data confirms that the state is facing a serious issue that needs to be addressed.

“The analysis further indicates that the frequency and severity of claims filed under an assignment of benefit is growing at a disturbing rate,” Citizens said in a statement.

Citizens’ actuaries further analyzed data for both litigated and non-litigated claims, with and without an assignment of benefits, or AOB, under which homeowners sign over control of their claim to water remediation companies, contractors and/or attorneys. Citizens said it reviewed the non-litigated claims, which wasn’t required by OIR’s data call, to “improve the effectiveness” of its response.

According to Citizens, the analysis found that cases in which customers assigned benefits to contractors or remediation companies were almost twice as expensive on average, and more likely to lead to litigation. The average litigated assignment of benefits claim cost for 2014-2015 was $37,677 statewide and $38,544 in the southern portion of the state – more than double that of a non-litigated claim, Citizens said. Claims where benefits weren’t assigned and there was no litigation averaged $8,507 statewide.

The insurer said the data shows that AOB and litigation work both separately and together to drive average claims costs more than four times higher than that of a simple non-assigned, non-litigated claim.

“Consumers are losing control of their claims by transferring their authority to contractors and attorneys under the current assignment of benefit system,” said Chris Gardner, chairman of Citizens Board of Governors. “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.”

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