With ‘smoking gun' report, it's time for Florida property insurance reform

Miami Herald

24-02-2025

For years, Floridians have darkly suspected they are getting fleeced — that's a kind word for it — by property insurance companies as rates skyrocketed and coverage of our homes shrank.
Now, a previously unpublished 2022 report, obtained by the Miami Herald/Tampa Bay Times, indicates that insurer parent companies were steering billions of dollars to affiliate companies, all while claiming losses. If this report proves true, and it certainly seems to be, homeowners were the unwitting dupes of a system in which insurance companies were able to siphon off money but keep charging more to homeowners.
The story about the report, published Saturday, should be required reading for every Florida homeowner. It details how insurers were able to move money via fees to 'affiliate' companies — owned by the insurers — and to shareholders. And yet, how many times have we all heard insurers claim poverty, saying that lawsuits, fraud and the state's exposure to hurricanes justified jacking up rates once again? You can almost hear our collective blood pressure rising across the state.
Doug Quinn, executive director of the watchdog American Policyholder Association, called the report a 'smoking gun.' Companies, he said, were shifting money 'from their left pocket to their right' and using poverty as an excuse to raise rates or declare insolvency.
Birny Birnbaum, executive director of the Center for Economic Justice and a former chief economist at the Texas Department of Insurance, called the numbers in the report — the amount of money insurers sometimes paid to affiliate companies — 'eye-popping.'
And the author of the report itself offered the opinion that, of the 30 Florida-based companies that provided data, 19 were paying fees to their affiliate companies that were 'not fair and reasonable.'
The affiliate system has long been recognized as a problem, but in 2021, Florida regulators actually got the power to demand more information from insurers and affiliates — and hold them accountable. They found that between 2017 and 2019, insurers in the study had a net loss of $432 million. The affiliates though? They had a net income of $1.8 billion. When all 53 companies in the state were included, net income was $61 million with affiliates making about $14 billion, the story said. (Those numbers likely included national companies that provide auto insurance.)
One thing to note, as the Herald/Times story reported: Profits of insurance companies are limited by regulators to about 4.5%. There is no such cap on the profits for affiliates and parent companies.
Lawmakers seem not to have known about the study until recently. The Office of Insurance Regulation didn't share the 2022 report with legislators, telling the Herald/Times: 'Our office does not release every internal analysis of companies to the Legislature,' the office said.
The study was never been made public and the executive summary — only — was released to the news organizations after an incredible two-year wait for public records.
Florida has been in an insurance crisis for years, and state lawmakers have made some efforts to address it. Recently, Gov. Ron DeSantis announced that premiums for Citizens Property Insurance, the 'insurer of last resort,' will actually go down in Miami-Dade County this year by an average of 6.3%.
We'll take it, of course, but that's not enough to make much difference for most people. Florida has topped the nation in premium costs for too long. We want to see the Legislature and governor tackle the insurance problem with the same kind of energy they brought to the topic of illegal immigration.
This year, Florida insurance regulators are asking lawmakers to define 'fair and reasonable' for the fees paid to affiliates and include the financial health of the insurer and how much in dividends the company paid out. This is the second try for this kind of legislation; an effort in 2023 failed, apparently because it would have upset the industry's business model.
Another reform under consideration would require affiliates be paid in dollar amounts, not percentages of premiums — which means affiliates get paid more when premiums go up.
We've talked about the need for insurance reforms for years. With this report, though, lawmakers have the information to act. You can bet homeowners will be watching intently.
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