You may have figured out that I like to watch the insurance news. I mean, I work for the company that produces my favorite insurance news (Insurance Journal) and I don’t say that just because I work here. I was an IJ reader before I became the Director of the Academy. Anyway, I’m really interested in the what laws are passed and how the different regulators operate. I’m actually a fan of the way that insurance regulation in the US has evolved over the last 300 years or so.
An item that is particularly interesting where I live in Florida is the topic of Assignments of Benefits. For those among us who aren’t dealing with this issue yet, let’s define what we’re talking about before we dig into the problem and maybe what Florida is trying to do to fix it.
An Assignment of Benefits is a simple document that allows someone, other than the insured to receive the money payable by an insurance policy. You signed one the first time you visited your doctor. It’s among the stack of paperwork when you first become their patient. It’s what allows them to send the bill to your health coverage without you having to pay the whole bill, submit it to the health coverage, and wait for the check to come from them. It makes the whole process of paying for medical needs faster and relatively less painful.
That’s not where the problem has come up. The problem is coming up when there has been a property loss. The insured does what he thinks is right, he contacts a contractor who comes out, examines the damage, creates an estimate, and then tells the insured that they can get started as soon as they sign this little form. What’s that form? You already know that it’s the assignment of benefits form. What happens next depends on the contractor. An ethical contractor works with the insurance company by providing estimates, letting the adjuster examine the property, makes the needed repairs and charges the insured their deductible amount. The home is repaired, and everyone is happy.
What seems to be happening more often is a little different. Somehow between the signing of the assignment of benefits and contact with the insurance company, either the contractor’s estimates become inflated or they simply contact their normal attorney, who files suit against the insurance company. In the end, the insurance company ends up paying more for the repair, the insured might end up having to write a check (or worse, end up with incomplete work), and homeowners’ rates for everyone go up.
I hear you asking if I have a solution to recommend, rather than just complaining about a problem in my state. That’s a fair question to ask. Right off, I don’t know what the solution is. I’ve read the text of the bill that’s before the Florida legislature and it looks like it might help. Do I think it’ll solve the problem? Not really. I believe that the vast majority of contractors are honest, hard working people who use assignments of benefits to make sure that they get paid for the work that they do. I also believe that most insureds are honest, too. I also believe that there are a few people that think that all they’re doing is taking money from insurance companies and no one gets hurt.
Let’s be clear about this, please. Whenever someone causes the costs of an insurance company to go up, like by inflating claims beyond what would be reasonable, those costs are not just absorbed by the insurance company. They aren’t even just absorbed by those new insuretech companies that promise transparency and giving back. Those costs are absorbed by consumers. In the end, the company will turn a profit somehow. They may not this year, but next year they will. By the way, the contractors (and others that work hard to get extra money out of insurance companies) are making their money, too. In the end, the only one that suffers is the consumer.