By Jennifer Ha, Head of Editorial and Publications, Insurance Information Institute
Hail damage is a growing problem in large regions of the United States and causes about $1 billion in damage to crops and property each year, according to the National Oceanic Atmospheric Administration (NOAA). As such, after years of field and lab research, the Insurance Institute for Business Home and Safety (IBHS) has recently released the results of its first hail impact performance program—the IBHS Impact Resistance Test Protocol for Asphalt Shingles—designed to track impact-resistant roofing products and to demonstrate the IBHS performance standard for impact-resistant shingles.
To test its standard, IBHS bought the most widely purchased impact-resistant shingles available to consumers and tested them in its lab under simulated real-world conditions, which it has now published on its website. The site includes disclosures, test standards and Member-only data.
As we noted a few weeks ago, the Florida Senate has passed a bill designed to reform parts of the state’s insurance assignment of benefits (AOB) system. Governor Ron DeSantis has stated that he plans to sign the bill into law. (You can view the Senate version of the bill, SB 122, here).
Florida’s AOB system has long been in dire need of reform.
As we document in our report “Florida’s assignment of benefits crisis”, an assignment of benefits (AOB) is a contract that allows a third party – a contractor, a medical provider, an auto repair shop – to bill an insurance company directly for repairs or other services done for the policyholder.
The process is innocuous and common throughout the country. But as our report notes, Florida’s unique legal system richly rewards plaintiff’s attorneys and vendors when they submit inflated bills to insurance companies and then file lawsuits when those bills are disputed. Tens of thousands of lawsuits.
Reform only addresses property insurance
The new AOB bill is designed to curtail at least some of this abuse by addressing how AOBs can be executed and how plaintiff’s attorneys can be compensated. But it’s important to note that the bill addresses AOBs in property insurance.
For good reason: AOB abuse has been a growing problem in homeowners property insurance.
Other lines also face AOB abuse
However, AOB abuse is not limited to property insurance. As we document in our report, the abuse actually started in personal injury protection (PIP) claims in personal auto insurance and then spread to homeowners following PIP reform in 2012. The abuse also spread into auto glass coverage in the past few years, though there was a decrease in auto glass abuse in 2018.
The lesson here is that AOB abuse is not limited to one line of insurance. Indeed, reforms could push abuse into a different line, as was the case with homeowners and auto glass after PIP was reformed.
While reforming AOBs in property insurance could have a significant impact on the problem in Florida, it remains to be seen whether abuse overall will change with reform. Some have argued that the abuse could continue in other lines where the reform doesn’t reach, like auto glass. And perhaps it could move into another line that hasn’t even been abused yet, like businessowners insurance. There are also worries that abusive AOB claims could spike right before the reform comes into effect.
For more information about the scope of the problem, download our report here.
Insurance Journal reports that the Florida Senate has passed a bill designed to reform parts of the state’s insurance assignment of benefits (AOB) system. Governor Ron DeSantis has stated that he plans to sign the bill into law.
Florida’s AOB system has long been in dire need of reform.
As we document in our report “Florida’s assignment of benefits crisis”, an assignment of benefits (AOB) is a contract that allows a third party – a contractor, a medical provider, an auto repair shop – to bill an insurance company directly for repairs or other services done for the policyholder.
The process is innocuous and common throughout the country. But as our report notes, Florida’s unique legal systems richly rewards plaintiff’s attorneys and vendors when they submit inflated bills to insurance companies and then file lawsuits when those bills are disputed.
Not just a few lawsuits. Lots of lawsuits. The numbers are staggering. There were roughly 1,300 AOB lawsuits statewide in 2000. There were more than 79,000 in 2013 and more than 153,000 in 2018, a 94 percent increase in just five years.
Inflated claims and massive volumes of lawsuits have the predictable result of driving up insurance companies’ legal costs. Insurers are forced to then pass those costs on to consumers. In the study, we estimate that Florida’s auto and homeowners policyholders have paid about $2.5 billion more for insurance over the past dozen years to cover the increase in legal costs.
That doesn’t even count the billions more in excess claim settlements that are at the heart of the problem.
The new bill seeks to address the problem by reforming how AOBs can be executed and how plaintiff’s attorneys can get paid for lawsuit settlements. If signed, the bill will come into effect on July 1, 2019.
You can download our report documenting the crisis here.
Our previous post discussed homeowners liability claims stemming from dog bites. Today, Janet Ruiz, I.I.I.’s Director of Strategic Communications, has these valuable safety tips from National Dog Bite Prevention
Week ® Coalition partners.
The American Veterinary Medical Association (AVMA) estimates there are approximately 78 million dogs in U.S. homes and each year 4.5 million people are bitten or injured. “Even the gentlest dog can bite if they are in pain, feel threatened, or are competing for resources such as food or space,” said Dr. John de Jong, AVMA President. “Not only is it important to understand how dogs behave, it is important to understand how a dog may interpret our behavior.” AVMA’s ‘Jimmy the Dog’ video series lets preschoolers look at how a dog might interpret different scenarios.
“We’ve seen firsthand over the years the tragic consequences surrounding dog bites and their effect on those involved – the people who are injured, the animals who may be relinquished or even destroyed, and the dog’s owners who have to cope with the loss of a beloved family member,” said Lesa Staubus, DVM, American Humane Rescue veterinarian, “Once your dog has bitten someone – or you or a family member fall victim to a dog bite – it will be already be too late. Let’s practice good prevention instead.”
Because of the high-risk involving dogs, babies, and children, American Humane offers a free online booklet called Pet Meets Baby that provides families with valuable information on introducing a new child to a home with a dog.
Additional safety tips from American Humane include:
NEVER leave a baby or small child alone with a dog, even if it is a family pet. Children are often bitten by dogs in their own household.
Make sure your pet is socialized so it feels at ease around people and other animals.
Walk and exercise your dog on a leash to keep it healthy and provide mental stimulation.
Regular veterinary visits are essential to regulating the health of your dog. A sick or injured dog is more likely to bite.
Be alert. If someone approaches you and your dog, caution them to wait before petting the dog. Give your pet time to be comfortable with the stranger.
Understand and respond to changes in your dogs’ body language. Look at the eyes, ears, tail, and posture to know when your dog may be happy, fearful, or angry.
Dogs provide millions of people with companionship, happiness and health benefits. But even dogs that are normally docile may bite when they are frightened or when defending their puppies, owners or food.
To educate pet owners about how to prevent dog bites The American Veterinary Medical Association (AVMA), the Insurance Information Institute, State Farm®, and others have joined together for National Dog Bite Prevention Week (April 7 -13).
Homeowners insurers paid out $675 million in liability claims related to dog bites and other dog-related injuries in 2018, according to the Insurance Information Institute (I.I.I.) and State Farm®, the largest writer of homeowners insurance in the United States.
California had the largest number of claims in 2018 followed by Florida. California also had the highest average cost per claim at $45,543.
By Lynne McChristian, I.I.I. Non-resident Scholar and Media Spokesperson
Ah, spring! The season of renewal, of fresh beginnings, of flowers in bloom – and of fresh batteries in the smoke alarm. Yes, you probably overlooked that last item, so here’s a reminder to put it on the spring to-do list.
Checking (and changing) the batteries in the smoke alarm is a good springtime habit. Most homes have a smoke alarm, but if you don’t check it with regularity, you can’t be sure it’s working. It is one of those out-of-sight, out-of-mind things, so here’s a reminder to put your home or business smoke alarm top of mind.
According to the National Fire Protection Association (NFPA), almost three of every five home fire deaths resulted from fires in homes with no smoke alarms or in homes where the smoke alarm was not working. NFPA also points to missing or disconnected batteries as the reason for inoperable smoke alarms. Dead batteries cause 25 percent of smoke alarm failures.
That chirping sound you hear at night? It’s not the first robin of spring. It’s the smoke alarm battery alerting you that it’s time for a change. And, if your smoke alarm is more than 10 years old, replace the entire alarm. It’s inexpensive protection that is worth every cent.
Most insurance companies offer discounts for smoke alarms, particularly monitored systems. After you check the batteries and/or upgrade your smoke alarm, check with your insurer on any possible discount. It might be a small amount, but the alarm itself is big protection – for every season.
It’s hard to imagine pitchers and catchers reporting in a mere 12 days while another polar vortex rips through the Midwest. Arctic blasts plunging the thermometer to 27 degrees below zero in some states? It’s safe to say our friends in Minnesota won’t be throwing the baseball around in the backyard this week.
But a baseball-less future is probably the least of your worries right now. Extreme cold is dangerous – and expensive, if the pipes in your house freeze and burst. Water damage could cost you as much as $5,000, if not more.
Prep your pipes to prevent freezing
There’s a lot you can do to prep for the worst. Consumer Reportshas tips for keeping pipes unfrozen and how to thaw them out if they do freeze.
The I.I.I. also provides a checklist and a survival guide for winter weather prepping your home.
How does insurance handle burst pipes?
But if the worst does happen, your homeowners insurance will probably offer some coverage. Damage from burst frozen pipes is usually covered – as long as you’ve taken reasonable steps to prevent the freezing in the first place. Stay warm out there!
You may have read the recent story featured in the I.I.I. Daily about raccoon damage and homeowners insurance. The gist: raccoons got into a house and caused $80,000 worth of damage. The homeowners were surprised to learn that their insurance wouldn’t cover any of it.
So what’s the deal with animal damage and insurance?
Let’s start with the easy stuff. If your dog Fido rips through your couch or pees all over the wall, you’re out of luck. Standard homeowners policies won’t cover any damage to your house or personal property caused by a pet. And”pet” is a pretty broad term. Doesn’t matter if it’s a Shih Tzu or a Clydesdale horse, pets are any animal you own.
What about animals that aren’t pets, like deer or birds or – God forbid – rats? That’s where things get interesting.
Building damage: You probably aren’t covered for any damage to the building caused by birds, rodents, insects, or vermin. There also probably won’t be coverage for any nesting or infestation. Insurance policies can vary widely, however, so make sure you ask your agent what is and isn’t considered a rodent or vermin (some insurers will say raccoons are vermin, some will say they’re not). The specific details of your policy will determine your coverage.
Damage to the building from other wild animals could be covered, though. If a moose runs through the sliding door to your deck, the damaged door would be covered.
Personal property damage: Unfortunately, your personal property is probably not covered no matter what kind of animal does the damaging. If a moose runs through your sliding door and wreaks havoc on grandma’s china, then you’re covered for damage to the door, but not the china.
Liability: You go to your friend’s house and bring Fido for a dog playdate. Fido then rips through your friend’s couch. Are you covered? Yes. Homeowners liability protection will cover the damage to other people’s property caused by your pets. Just not your property. Friendship saved.
A squirrel chews through the wiring in your car. Fido dents your door chasing after a squirrel. A moose rams your car in a fit of rage, smashing the windshield. (Why do I keep thinking of moose scenarios?)
Does personal auto insurance cover animal damage? Yes, if you have optional comprehensive coverage. If you only have collision coverage, then you’re not covered.
Collision only covers damage when a car overturns or hits another car or object. Comprehensive covers…more or less everything else: damage from falling objects, fire, explosions – and birds and animals.
So if you paid the extra premium for comprehensive coverage (like most Americans do), then you’re covered for damage from chewing squirrels, incautious Fidos, and rampaging moose (meese?).
On December 11, 2018 the Insurance Information Institute (I.I.I.) published a report documenting Florida’s assignment of benefits crisis – what the crisis is, how it’s spreading and how it’s costing Florida consumers billions of dollars.
You can download and read the full report, “Florida’s assignment of benefits crisis: runaway litigation is spreading, and consumers are paying the price,” here.
Today we also published PowerPoint slides accompanying the report. We hope the slides will help illustrate the depth and breadth of the abuse. You can download the slides via this link.
An assignment of benefits (AOB) is a contract that allows a third party – a contractor, a medical provider, an auto repair shop – to bill an insurance company directly for repairs or other services done for the policyholder.
The process is innocuous and common throughout the country. But as our report notes, Florida’s unique legal systems richly rewards plaintiff’s attorneys and vendors when they submit inflated bills to insurance companies and then file lawsuits when those bills are disputed.
Not just a few lawsuits. Lots of lawsuits. The numbers are staggering. There were roughly 1,300 AOB lawsuits statewide in 2000. There were more than 79,000 in 2013, and nearly 135,000 through November 9, 2018, a 70 percent increase in just five years.
Inflated claims and massive volumes of lawsuits have the predictable result of driving up insurance companies’ legal costs. Insurers are forced to then pass those costs on to consumers. In the study, we estimate that Florida’s auto and homeowners policyholders have paid about $2.5 billion more for insurance over the past dozen years to cover the increase in legal costs.
That doesn’t even count the billions more in excess claim settlements that are at the heart of the problem.
Many of these inflated bills and lawsuits are driven by a select number of contractors and their attorneys. Florida insurance customers can protect themselves – and their fellow citizens – by being very cautious when signing away their benefits under an AOB.
Pop quiz: what’s one of the most common types of homeowners insurance claims? (Hint: it’s not fire.)
It’s water damage. Maybe that’s not surprising – it rains a lot in many places. But what may surprise you is that things like pipe bursts and broken appliances are increasingly the main causes of water damage in homes.
In insurance-speak, these are called “non-weather water damage claims.” Worryingly, these claims are happening more often and are getting a lot more expensive. A Best’s Review article reports that the average homeowners water damage claim is now over $6,700. Large losses (over $500,000) have doubled in number over the past three years. Non-weather water damage is now costing insurers (and their policyholders) billions in losses every year.
This is happening for several reasons. Our housing stock is aging, as is our infrastructure. More houses are being built and they’re getting bigger – many houses now have extra bathrooms and second-floor laundry rooms, which means more piping. (The story is probably different in Florida. You can read why that is here.)
But the worst part is that many – if not most – water damage claims are preventable. Inspecting pipes or conducting routine maintenance can go a long way. That’s where the internet of things (IoT) comes in. Smart devices and connected sensors installed on piping can detect leaks before they occur or before they cause too much damage. They’re basically smoke detectors, but for water.
And they work. Best’sReview noted that installing IoT devices can reduce water lossesby up to 93 percent.
The Review quoted an IoT company CEO who claimed that leak detection devices could save insurers and their customers $10 billion every year.
Homeowners have admittedly been slow to install IoT to help detect leaks. But insurers are hopeful that raising awareness about the issue, offering policyholder incentives like premium discounts, and encouraging IoT installation during home construction will begin to turn the tide.
Update: Of interest, Washington state adopted a rule in 2018 that specifically mentions water monitors and water shut-off systems as permissible tools for an insurer’s risk reduction program.
