JMI head says Florida can’t let opportunity for insurance reform “go to waste”

by | Nov 28, 2018

 

The head of the James Madison Institute (JMI), a free-market think tank based in Tallahassee, says with a new Republican administration moving into the Governor’s Office and a new slate of justices that will likely make the Florida Supreme Court more conservative, Florida should not let the opportunity to reform the state’s insurance market “go to waste.”

Robert McClure, JMI’s president and CEO, spoke Wednesday at the Florida Chamber’s 2018 Insurance Summit in Miami.

“Florida has, despite an exceptionally friendly business environment, struggled with specific practical reforms to our insurance industry,” McClure said. “Consequently, our state continues to remain a standout for frivolous lawsuits and abuse of the tort system. Setting our state on the right path requires a fundamental re-examination of both how insurance policies meet the market needs and how abuse of our tort system distorts that market.

“Unfortunately, a relatively small number of bad actors cost the rest of us dearly through higher insurance rates and stifled economic growth,” McClure added.

McClure’s presentation before the Florida Chamber’s insurance summit coincides with the release of a JMI report that identifies three areas of needed insurance reform. Those areas include:  assignment of benefits (AOB), personal injury protection (PIP), and tort reform.

The report, called Roadmap to Reform, was authored by Christian Cámara, senior fellow at JMI.

“Florida’s legal environment has been corrupted to benefit a handful of overzealous lawyers and unscrupulous vendors to the detriment of millions of consumers who are paying thousands of dollars in unnecessary insurance costs,” Cámara said. But there exists a clear path to solving this crisis, and it should be at the top of the policy agenda. Every day that we don’t act, Floridians pay.”

The report says that’s especially true with the issue of AOB, which allow a third party – such as a contractor, a water-extraction company or other vendor – to stand in the place of the insured and assume the policyholder’s benefits, including the right to file lawsuits against insurers.

Although most vendors conduct themselves professionally, Cámara says there is overwhelming anecdotal evidence that abuse of these assignments is widespread. He writes that abuse is contributing to what has become an emerging cost driver that results in higher rates for consumers.

AOB-related lawsuits were rare in Florida a little over decade ago. Between 2004 and 2005, there were just slightly more than 9,400 assignment-of-benefits related suits filed statewide.

“In subsequent years, these lawsuits have multiplied by nearly 1,000 percent, with 92,000 such suits filed between 2013 and 2014 alone. Indeed, since 2000, there has been a 90,000 percent increase in AOB litigation,” the report says.

Cámara says the same issues are affecting auto insurance rates.

“For the sixth year in a row, the Florida Legislature failed to tackle the growing assignment of benefits crisis that, if left unaddressed, is projected to further increase rates statewide by an average of almost 30 percent by 2022,” Cámara writes in the report. “The last major overhaul to the state’s auto insurance system in 2012 successfully tackled fraud, but did little to close loopholes in Florida law that encourage over litigation over small claims.”

But, the Restoration Association of Florida defended its members issuing a statement Wednesday afternoon in response to the claims regarding AOB by the Florida Chamber and JMI.

“The Property Insurance Industry is once again talking about ways to limit and restrict homeowners’ rights and abilities by demonizing the assignment of benefits—a common insurance practice that has been around for more than 100 years—and allows homeowners to make repairs to their homes immediately with no out-of-pocket costs and mitigates further damage,” said Amanda Prater, spokesperson for the restoration association.

“What insurance companies should be doing is focusing on ways to improve their claims handling processes and treating their customers fairly,” Prater went on to say.

The issue of AOB is a key item of the agenda for this year’s Florida Chamber of Commerce 2018 Insurance Summit, which  brings together industry experts, representatives from the business community and elected officials for a four day discussion about the issues facing the state’s insurance market.

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