Originally published by Insurance Journal | View Story
By Amy O'Connor
As Florida insurers focus on addressing mounting losses in the state’s property insurance market with legislative reforms, rising rates and coverage restrictions, other stakeholders are working to educate consumers about one issue that is perpetuating the markets problems – contractor fraud.
Florida’s Insurance Consumer Advocate Tasha Carter wants to close what she says is a consumer knowledge gap with a new program offering tips, services and resources on this issue, and she’s looking to insurance agents to help her spread the word.
“I don’t think that most homeowners understand what’s happening in the marketplace,” Carter said. “Of course, they’re receiving their renewal notices with the increased premium rates [and] most of them mistakenly think that that maybe due in part to recent hurricanes or claims that have been filed across the board.”
Carter hears frequently from consumers who are unhappy with the large premium increase’s carriers are implementing to offset their deteriorating financial conditions. The Florida Office of Insurance Regulation said recently it had approved 105 rate changes, 90 of which were for rate increases, over the last year, with 55 of those for rate increases of more than 10%.
Excessive litigation from first party lawsuits and unscrupulous contractors promising homeowners a new roof or kitchen if they sign over their insurance policy rights is partly to blame. These contractors, who in some cases work with attorneys or public adjusters, inflate repair costs and sue the insurer if they refuse to pay or dispute the amount. In some cases, homeowners have been left with unfinished work and little recourse.
Years of this abuse has led to billions in losses for the Florida insurance industry, with more than $1.5 billion occurring last year alone.
“Most oftentimes as I am speaking with consumers, they’re not aware of some of the fraudulent schemes that are taking place that are costing the industry and are not aware how these factors truly impact them and their insurance rates,” Carter told Insurance Journal in an interview with the Florida Association of Insurance Agents’s (FAIA) Kyle Ulrich on her new Demolish Contractor Fraud initiative.
Carter launched the program last month to educate homeowners on how they can avoid becoming victims of such schemes. The program provides an overview of what contractor fraud is, what to look for when hiring a contractor, and what actions a contractor can legally take on behalf of the policyholder.
“What I do think homeowners are concerned about … is wanting to ensure that when they enter into that agreement or that contract with the contractor, ensuring that that contractor is going to provide the services that they are expecting,” Carter said. “And that they’re going to perform quality work, they’re going to do it in a timely manner, and they’re not going to simply use the situation to take advantage of homeowners.”
Also on the website is contact information for state departments that can assist consumers if they have questions, suspect they are being scammed or are seeking information on the state’s construction recovery fund if they have sued a contractor.
“We are trying to be as comprehensive as possible to ensure that consumers are informed and they’re educated so that they can simply protect themselves from falling victim,” she said. “One of the primary reasons that I created the program is as Florida’s insurance consumer advocate, one of my primary concerns is the availability and affordability of homeowners insurance for Florida’s homeowners.”
FAIA is helping the ICA spread the word about contractor fraud and the new awareness campaign. The association has an active membership of 21,000 agents throughout the state who are also concerned about the market’s downward spiral and how its impacting their customers.
FAIA President and CEO Ulrich said the partnership with ICA Carter made sense given the two share similar priorities of protecting homeowners from being targets of contractor schemes and wanting a healthy insurance market.
“I think that consumers, generally speaking, are concerned about fraud and they want to make sure that they’re hiring a reputable contractor, but I don’t think that they understand the nexus between contractor fraud and what’s happening in the insurance marketplace,” Ulrich said.
Agents have seen firsthand how the exploiting of homeowners claims has led rate increases and reduced coverage, Ulirch said, and agents are now trying to educate their customers.
To help spread awareness of contractor fraud and the new initiative, FAIA has developed talking points for agents and a form letter they can send to their customer list about what’s happening and what to watch out for.
“We have a tremendous number of our members who have really committed to knowing and understanding and being willing to be a part of the solution,” he said. “We have a unique perspective and the ability to talk directly to consumers, unlike most other groups, especially companies.”
FAIA has heard from its members for about the last 10 years that there’s been a shift in consumer perception of insurance and the claims process that the association believes is driven by the involvement of third parties, Ulrich said.
“There has been a proliferation of people who are out there literally mining claims and trying to solicit consumers to file claims that they otherwise were unaware that they may have had,” Ulrich said. “We felt like there was an awful lot of nexus between some of the things that the ICA is talking about here and what we’re hearing from our members, and any way to better inform the consumer about that nexus is a role that we want to play.”
Part of the goal for FAIA is to encourage consumers to contact their lawmakers and demand reforms be passed so rates do not continue to rise, or worse.
“Pretty much every carrier in the marketplace has some sort of restrictions now, whether it be by geographic region or age of the home, age of the roof, other underwriting factors,” Ulrich said.
Customers who can’t afford a 30%-plus rate increase are looking to their agents for help, but Ulrich says agents hands are tied.
“They just don’t have very many options to provide the consumer,” he said, which is leading to a flood of new policies for Citizens Property Insurance Corp., the state’s insurer of last resort.
“That’s not a good situation for the consumer,” he said. “It’s good that they have some option, that the state is there to fill that void, but it’s not providing the comprehensive coverage that many homeowners need at this point in time.”
Carter said awareness is growing among most lawmakers. She met with several before the current legislative session began in March and shared some specific consumer examples of “exactly what’s happening and how homeowners are being directly impacted by the level of fraud that’s taking place.”
And while Carter is in support of certain reforms the industry backs, such as reducing the claims filing deadline from three years to two for new claims, she is not in support of the roof reimbursement provision in Senate Bill 76 that would allow insurers to limit how much they will cover for roof replacements.
“I think that can absolutely be harmful for consumers. They can also be blindsided by that,” she said. “I would much rather see the focus being placed more on the front end, not the back end after a claim is filed … can we prevent the solicitation from the unscrupulous contractors and the intentional deceptive practices that are occurring? Let’s address those so that we prevent the claim from even being filed and thus we prevent any type of subsequent litigation that may occur as well.”
As the insurance consumer advocate, Carter said there will be times when her advocacy work on behalf of policyholders may not align with what insurance companies think is in their best interest. But when it comes this issue, she says they are on the same page because a healthy insurance market is in everyone’s best interest.
“I’m going to continue to identify ways that I can assist and advocate on behalf of consumers to ensure that coverage is available for them, and it is affordable for them, and that we are addressing the factors that are not only impacting individual policyholders, but also impacting the insurance industry as a whole,” Carter said.