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Sun Sentinel

Heritage Insurance seeking hefty rate hikes, blames claims fraud

By Ron Hurtibise Sun Sentinel - March 2, 2018

Heritage Property & Casualty, one of the state’s largest homeowner insurance companies, is seeking double-digit rate increases for new and renewing customers this year.

It’s part of a storm of large rate increases by insurers throughout the state. Industry officials blame insurance fraud tied to the “Assignment of Benefits” crisis. They add that further rate hikes stemming from Hurricane Irma last year will start hitting consumers this summer.

Heritage’s increases, if approved, will affect tens of thousands of customers throughout the state — including most of the 92,200 former customers of state-run Citizens Property & Casualty assumed by Heritage through the state’s “takeout” program.

Those customers, called “Select” policyholders by Heritage, would see rates increased by an average 14.5 percent beginning May 1, according to the Clearwater-based company’s rate filings with the Florida Office of Insurance Regulation. The agency has final say on whether they will be approved.

Also affected would be 60,521 consumers who weren’t acquired through the Citizens takeout program — who Heritage calls “Preferred” policyholders. They would get a statewide average 14.2 percent increase upon renewal after July 1.

At the end of September 2017, Heritage had 41,658 homeowner policies in the tricounty region — down from 49,658 two years earlier. The company stopped writing new policies in the region in 2016 because of the claims crisis and later resumed writing only to a select few customers.

Responding to questions by email, Heritage CEO Bruce Lucas said the latest rate increases are a direct result of Assignment of Benefits abuses — a claims cost driver that insurers say begins with repair contractors convincing policyholders to sign over the right to directly bill insurers for repairs made to their homes.

Contractors then do unnecessary work, submit inflated invoices to insurers and — working with about a dozen mostly South Florida-based law firms — bombard the insurers with lawsuits in hopes that plaintiffs win quick settlements and attorneys collect fat legal fees, insurers say.

Contractors then do unnecessary work, submit inflated invoices to insurers and — working with about a dozen mostly South Florida-based law firms — bombard the insurers with lawsuits in hopes that plaintiffs win quick settlements and attorneys collect fat legal fees, insurers say.

“Assignment of Benefits fraud is costing homeowners over $1 billion annually,” Lucas said. “Every insurer is raising rates across Florida because AOB is the largest fraudulent scam impacting Florida in the history of the state.”

Contractors and attorneys counter that they file suit when insurers underpay or refuse to pay fair settlements for their work. Several contractors recently told state lawmakers that insurers deliberately become adversarial when they learn a policyholder has enlisted third-party assistance by signing an AOB with a contractor, or hiring an attorney or public adjuster to help with their claim.

According to a report from the Florida Justice Reform Institute, the number of insurance lawsuits with an AOB increased statewide from 82,263 in 2015 to 129,781 in 2017.

Yet, efforts to find a legislative solution have failed for five straight years amid fighting between the insurance industry and plaintiffs attorneys. This year’s session looks no different, as compromise has eluded the two sides with just a week to go before lawmakers go home.

Edie Ousley, vice president of public affairs for the Florida Chamber, which sides with insurers in the standoff, said the Heritage rate proposals come as no surprise.

“For lawmakers who don’t think AOB reform is needed, this should be another wake-up call that something must be done,” she said in an emailed statement.

Companies that have imposed steep rate increases on their customers over the past year include People’s Trust (16 percent), Citizens (6.7 percent), Southern Fidelity (14.6 percent), State Farm (9.5 percent), and Castle Key (10 percent).

While South Florida is considered the worst area of the state for AOB abuses, Heritage’s rate filing includes requests for large increases in territories outside of the tricounty region, including, for CItizens takeout customers, 25 percent hikes in parts of Hillsborough, Brevard, Escambia, Martin, and Okaloosa counties. Increases approaching 25 percent are sought for parts of Pinellas, Sarasota, and Indian River counties.

Lucas said those rate-hike requests reflect the spread of claims assignment abuses throughout the state.

A majority of Heritage’s former Citizens policyholders in South Florida would see increases ranging from 13.8 percent ot 15.5 percent.

Average requested increases for tricounty homeowners who weren’t acquired through the Citizens takeout program range from 13.8 percent to 25 percent.

Statewide, about 17,425 condo owners acquired from Citizens would get rate increases averaging 7.1 percent. The company’s 8,000 mobile home owners would pay an average of 13.8 percent more, and owners of 17,900 rental homes would pay 14.9 percent more for dwelling/fire coverage.

Lucas said Heritage’s pending rate increases do not reflect expected hikes for costs of reinsurance that insurers must have in place before the June 1 start of hurricane season. Reinsurance costs for Florida insurers are projected to increase as a result of losses paid to victims of Hurricane Irma, and that will trigger a separate round of rate hikes for consumers, he said. “Reinsurance [costs] are going higher and rates will move higher as a result,” he said.

Dulce Suarez-Resnick, vice president of sales and marketing for Miami-based agency NCF Insurance Associates, said she expects flood insurance premiums to increase beginning in October.

She also noted that auto insurance rates are rising 15 percent to 25 percent for drivers with no tickets or accidents. “I don’t know how we’re going to be able to afford insurance in South Florida,” she said.