Assignments of Benefits (AOBs): Fundamentals, Insurance Implications, and Curing Abuse

Summary

This article addresses what has become a contentious insurance topic in some states: AOBs. An AOB transfers a policyholder's rights to benefits payable under an insurance policy to a third party. They are common and largely noncontroversial in many insurance contexts, such as health insurance. There, it is routine for a policyholder to authorize a healthcare provider to bill the insurer directly for services rendered and for the provider to receive direct payment from the insurer. However, AOBs have become a hotbed of controversy and abuse nationwide when used in connection with property insurance, especially homeowner's insurance. In the aftermath of catastrophes like hurricanes, tornadoes, floods, and fires, consumers, and insurers have been scammed by unscrupulous contractors and service providers by the use of AOBs.