Florida House Launches Inquiry into Property Insurance Practices
Florida lawmakers have initiated an investigation into the financial dealings of property insurance companies, focusing on the flow of funds to affiliated firms and shareholders amid claims of industry losses. The inquiry, which began with a hearing on Friday, stems from a controversial report detailing these transactions and aims to shed light on the factors contributing to high insurance rates.
The House Insurance & Banking Subcommittee grilled state Insurance Commissioner Michael Yaworsky and former Commissioner David Altmaier regarding a 2022 report. This report, which had not been previously provided to lawmakers or the public, outlined how money was being funneled to affiliated companies during a time when the industry argued it was struggling financially. The situation has sparked questions about the accuracy of those claims and the rationale behind significant rate increases for homeowners.
Rep. Mike Caruso, R-Delray Beach, expressed the legislature’s concerns, stating, “Our purpose today is to find out if insurance companies have been allegedly ripping us off, ripping the citizens of Florida off, why rates are so high.”
The 2022 report, prepared by Risk & Regulatory Consulting, LLC, for the state Office of Insurance Regulation, examined 53 insurers. It considered aspects such as income, payments to affiliates, and shareholder dividends. The report indicated that while the companies collectively reported a net loss of $432 million from 2017 to 2019 when excluding “outliers,” their affiliated firms recorded net income of $1.8 billion during the same period.
The hearing also addressed the role of managing general agents (MGAs), firms affiliated with insurance companies. Insurers pay MGAs to manage day-to-day operations, including policy issuance and claims management. Rep. Hillary Cassel, a Dania Beach Republican and attorney representing consumers, questioned why regulators hadn’t further examined affiliate transactions.
Commissioner Yaworsky acknowledged the importance of scrutinizing potential conflicts, stating, “If you are a commissioner of insurance and you don’t have a concern about perverse incentives that can exist in holding-company arrangements, MGAs and affiliate transactions, then you shouldn’t have the job.”
Yaworsky also noted that the state has reinforced regulations over time, with MGAs assisting in drawing investors to the sometimes risky insurance market.
Altmaier, who resigned as insurance commissioner in December 2022, and Yaworsky both mentioned the need to further analyze the incomplete report. The report’s findings emerged during a turbulent period in Florida’s insurance market, with companies withdrawing from the home owners’ market, increasing costs, and, in some instances, failing due to financial challenges.
House Speaker Daniel Perez, R-Miami, directed the Insurance & Banking Subcommittee to hold these hearings, which may involve subpoenas and sworn testimonies, following a Tampa Bay Times/Miami Herald story about the report last month.
Perez stated the report raises questions about prior insurance company claims that led to changes in state laws. During a News Service of Florida podcast, Perez shared that industry representatives had warned lawmakers that changes were vital to avert their departure from Florida’s insurance market. “And now we believe there’s a potential that those cries were not real, that their profits were higher than expected and potentially there was some sort of shell game being played,” Perez said.
Senate President Ben Albritton, R-Wauchula, also indicated he would meet with Yaworsky to discuss the report. The investigation seeks to establish the facts, according to Albritton, regarding the information and financial claims.
