Although a major hurricane hasn’t unleashed its full fury on Florida in more than a decade, property insurance rates are climbing statewide because of another kind of storm — claims abuse.
Insurers continue to face major challenges due to abuse, shrinking their profits and driving up their rates.
Those challenges are of heightened concern as another hurricane season approaches that’s expected to be busy, with the National Oceanic and Atmospheric Administration expecting five to nine hurricanes to form. The Atlantic season runs from Friday, June 1, to Nov. 30.
Since 2012 insurers have seen a surge in fraudulent claims, primarily involving the “assignment of benefits,” leading to big losses. The practice allows policyholders to assign their claims to a contractor doing the repairs, giving the contractor the right to collect payments directly from the insurance company.
When claims are assigned, they’re often more expensive and can lead to costly legal battles over payment. They’re one of the biggest reasons Citizens Property Insurance Corp., the state’s insurer of last resort, posted a loss of $27 million last year, said Michael Peltier, a Citizens spokesman.
“The disturbing part is we are expecting an even greater loss for the upcoming year,” he said.
Insurers have seen a rise in water-damage claims, especially in South Florida, involving broken pipes, dishwashers and water heaters, not natural disasters such as hurricanes. Insurance companies blame it mainly on fraudulent activity.
“The private market is experiencing the same trend that Citizens is, from all of the indications that we’ve gotten,” Peltier said. “It’s not just our problem.”
What’s significant, he said, is that state law allows Citizens to raise its rates only by a maximum of 10 percent a year, but private companies aren’t under the same restrictions.
