Florida Insurance Companies & CEOs Make Record Profits and Pay – and Hide Them

Florida Insurance Companies & CEOs Make Record Profits and Pay – and Hide ThemIf you want to understand why it is that insurance companies in Florida cry about the cost of doing business here and then … continue to do business here, read Lawrence Mower’s article in The Miami Herald, “Florida Senate approves new insurance bill — without profit disclosure requirements.”

Here are excerpts from the article:

Insurance company profits are capped by state regulators, who approve rate filings each year. But many domestic insurers’ business models revolve around creating sister and parent companies, which charge the original insurer fees. These affiliates can charge the insurance company up to $25 per policy, as well as a percentage fee of premiums for providing services to the insurer. That fee, commonly between 20% and 30% and approved by regulators, is often tied to policyholder rates. When rates go up, so does the fee.

Between 2005 and 2017, when the state saw no named storms, domestic insurers were highly profitable. In 2015, the CEO of Tampa-based Heritage Insurance Holdings made $27.3 million, more than twice the CEO of State Farm, the nation’s largest insurer. In 2017, the CEO of Fort Lauderdale-based Universal Insurance Holdings was the highest-paid property and casualty insurance company executive in the nation, at $19.3 million in compensation. However, state regulators have repeatedly cited excessive fees to affiliate companies as a reason insurers are going under. When Tampa-based Homewise Insurance Co. and one of its affiliates went insolvent in 2011, for example, auditors hired by the state dug into the company’s books. They found tens of millions of dollars in fees paid to its parent company each year.

“The heavy flow of cash out of the Company … weakened both insurance companies and ultimately contributed to their insolvency,” auditors wrote. The initial version of SB 7052 would have provided unprecedented insight into insurers and their affiliate companies. Companies would have been required to report to the state: the “actual cost” of each service provided by an insurers’ affiliate company the relative financial condition of the insurer and its managing company the amount of dividends paid by the parent company The language was dropped during negotiations with the House and Senate, however. The Senate bill sponsor, Sen. Travis Hutson, R-Elkton, said both sides agreed that they didn’t want to do anything to “upset the applecart” of Florida’s insurance industry. And that included not challenging the industry’s business model.


On Thursday, the Senate passed the bill with no debate.

So the companies make huge profits in the years without major storms. They do this by setting and paying sister companies and parent companies these fees. Then declaring that they are losing money.

And in the years with major storms, the insurance companies fight the homeowners on each claim. And the insurance companies blame the lawyers for the homeowners. That makes for good press. And the insurance companies and the legislators in Tallahassee who carry the water for the insurance companies can sell that. (These legislators get continuous and major contributions from the insurance lobby). But as we all know, if you can’t hire a lawyer, you are at the complete mercy of the insurance companies.

And the new laws in Tallahassee eliminating the right of the consumer, you, to recover attorneys fees when you have to sue your own insurance company will not ever result in lower premiums. Don’t be fooled. The insurance companies will not lower premiums. They will only profit more. Free enterprise is great. But passing laws by misrepresenting the facts is not.