With the state-backed insurer blaming costly water-damage claims in South Florida, residential customers of Citizens Property Insurance Corp. could see an average 8.2 percent rate increase next year, according to a new proposal.

The proposal, which would take effect in September 2019, will go before the Citizens Board of Governors during a meeting Wednesday. If the board signs off, the proposal would need approval from the state Office of Insurance Regulation.

The average 8.2 percent hike would hit “personal lines” policyholders, including owners of single-family homes, owners of condominiums and renters, though increases would vary across the state depending on factors such as location. Commercial policies could see an average 9 percent increase.

In backup material sent Monday to reporters, Citizens blamed water-damage claims and the controversial practice known as “assignment of benefits” for driving up costs and spurring a need for higher rates. The issue involves claims for water damage such as busted pipes in homes, not storm-related water damage.

Assignment of benefits, or AOB as it is known, is perhaps the most-controversial insurance issue in the state Capitol. Under assignment of benefits, homeowners sign over insurance claims to contractors, who then pursue payments from insurance companies.

Citizens, which has about 435,000 policies, and other insurers contend the AOB process is filled with fraud and leads to expensive litigation. But contractors and trial attorneys argue that assignment of benefits helps ensure that damage claims are paid properly.

In the material released Monday, Citizens said “skyrocketing” water-damage claims in Miami-Dade, Broward and Palm Beach counties have come at the same time Citizens has made progress in other financial areas. As an example, Citizens has been able to purchase relatively affordable reinsurance — essentially backup insurance — that has better positioned it financially to deal with major hurricanes.

“While rates for many policy types and areas have been approaching actuarial soundness over the past few years, this recent surge in claims related to non-weather water losses in South Florida has increased Citizens' net claims payments and litigation expense costs,” the material said. “These losses are significant enough to offset previous progress made toward rate adequacy and the decreased cost of reinsurance and other risk transfer products, resulting in the need for a corresponding rate increase.”

But with the AOB issue likely to be debated again during the legislative session that starts in March, Citizens, other insurers and business groups will face opposition.

For instance, the Florida Chamber of Commerce held an insurance “summit” in late November that included calls for making changes in assignment of benefits. But the Restoration Association of Florida, which includes contractors, sent out a statement pointing to widespread consumer complaints against insurers for the way claims are handled.

“The property insurance industry is once again talking about ways to limit and restrict homeowners' rights and abilities by demonizing the assignment of benefits — a common insurance practice that has been around for more than 100 years — and allows homeowners to make repairs to their homes immediately with no out-of-pocket costs and mitigates further damages,” Amanda Prater, a spokeswoman for the association, said in the Nov. 28 statement.

Ordinarily, Citizens would have moved forward with seeking approval of proposed rate increases earlier this year. But in June, it decided to postpone a rate proposal to gauge the impact of a new program aimed at holding down costs of water-damage claims.

The so-called managed repair program, in part, offers incentives for policyholders to use Citizens-approved contractors, with the hope that it will reduce litigation.

Jim Saunders reports for the News Service of Florida.