"It's been seven years of hard work,but today's passage of assignment of benefits reform legislation inFlorida is a major victory for consumers." Liz Reynolds, regionalvice president of the Southeast for the National Association ofMutual Insurance Companies, said in a statement. (Photo:Shutterstock)

The Florida Senate approved an overhaul of the insurancepractice known as assignment of benefits, or AOB, and Gov. RonDeSantis issued a statement saying he will signit. AOB has been a highly controversial issue in recentyears, with insurers arguing that litigation and fraudinvolving the practice are driving up property insurancepremiums.

The bill, as written, is expected to keep consumers in controlof their insurance policies and, over time, reduce insurers' costsfor inflated claims and litigation that must be passed along toconsumers. Changes to one-way attorney fees should eliminateincentives for filing costly lawsuits. Other provisions addprotections for consumers, including allowing policyholders theright to rescind an AOB without penalties and requiring writtenestimates for work.

"The exponential growth in AOB abuse has contributed to mountinginsurance costs for Floridians for far too long," said Gov.DeSantis in a statement. "In recent years, there have been calls forreform and today, the Legislature took action. I thank them fortheir efforts in getting this done and I look forward to signingthis meaningful legislation into law."

Related: 'Loss creep' from major recent hurricanes threatenspremium hike in Florida

Fraud, abuse led to rate increases

Accusations of fraud and abuse of AOB clauses and theproliferation of nonwind water-related claims —specifically litigated claims — have led many Floridaproperty insurers to push for significant rate increases in recentyears. Fitch Ratings notes the bill contains a number of provisionsthat should benefit property insurers in the state and moderaterecent loss cost escalation in Florida that has far exceedednational averages.

Litigated claims had been a particular point of interest forcarriers, as the number of AOB-related lawsuits increasedsignificantly in Florida over the past decade. According to areport published by the Insurance Information Institute, the numberof AOB-related lawsuits increased to 153,007 in 2018, up from 1,300in 2000 as AOB holders had been emboldened to file lawsuits as aresult of "one-way attorney fees" provisions under existing Floridalaw.

Related: State Farm Florida asks judge to shield assignmentof benefits info

Insurance industry elated by legislative efforts

The Coalition Against Insurance Fraud: "TheCoalition applauds the Senate and House for their leadership anddetermination to bring lasting AOB reforms to Florida consumers.Their bipartisan cooperation will benefit all Floridians —except the shady contractors who preyed on honest homeowners,"Dennis Jay, executive director, said in a statement.

The American Property Casualty InsuranceAssociation: "Addressing AOB abuse on the homeowners' sideis vital to putting a stop to the number of AOB lawsuits filed inFlorida, which are only growing steeper with each passing year andresulting in higher insurance costs. This law will protect Floridahome and business owners alike from bad actors who are takingadvantage of them and our legal system just to put more money intheir own pockets," Logan McFaddin, regional manager, said in astatement.

The Florida Property & CasualtyAssociation: "This legislation will stabilize the runawayAOB litigation and provide policyholders with valuable tools toprotect themselves against predatory vendors. It will cause vendorsto think twice before they bring a fraudulent lawsuit against aninsurance company," William Stander, executive director, said in astatement.

The National Association of Mutual InsuranceCompanies: "It's been seven years of hard work, buttoday's passage of assignment of benefits reform legislation inFlorida is a major victory for consumers. We are thrilled to seeFlorida legislators put policyholders first, something that asmutual insurers, NAMIC members have done for generations. Thislegislation is an important step toward curbing the explosion oflawsuits stemming from unscrupulous contractors and attorneyspreying on consumers that has driven up the cost of residentialinsurance for everyone," Liz Reynolds, regional vice president ofthe Southeast, said in a statement.

Related: AAIS's Florida Homeowners By-Peril Insurance programapproved by FLOIR