The Florida Office of Insurance Regulation has approved higher rates for Citizens Insurance customers, but they are below initial estimates.
The less-than-expected increase is due to the anticipated impact of assignment of benefits reforms passed by the Florida Legislature earlier this year.
The assignment of benefits system allows property owners to sign their insurance benefits over to contractors who are conducting repairs, after which the contractor pursues the insurance company for payment. Critics of the system say it exposes insurers to excessive lawsuits by contractors seeking to exploit the system. The insurance industry supported the reform package passed by legislators.
"We are pleased to see that AOB reforms passed by the legislature are already having a positive effect on rates," said Florida Insurance Commissioner David Altmaier in a press release.
While the lower rate hikes will please consumers, leaders warn that assignment of benefits reforms will not end Florida's ongoing issues with cost and access to property insurance.
"As a result of HB 7065, some of the bad actors have already began crafting alternative mechanisms in an attempt to circumvent this legislation. It is our hope that those actions will not result in yet another insurance availability and affordability crisis for Florida's policyholders," said Karen Kees, press secretary for the Florida Office of Insurance Regulation.
Kees said that many of the hoped-for impacts of assignment of benefits reforms will not be seen immediately.
"Due to the compounding nature that nearly a decade of abusive litigation tactics has had on Florida's market, it may take some time for the provisions of the new law to truly be reflected in losses, loss adjustment expenses and rate indications," Kees said.
She said it's not clear whether the reforms will boost competition in Florida's insurance market. A number of insurers have pulled out of Florida in recent years after heavy losses following a series of busy hurricane seasons.
"It's too early to tell what the impact of the AOB reform will have on new entrants to the market," Kees said.