Rates Rising, But Florida Home Insurers Report Still Losing Money

Tuesday’s Post  10/25/11 –  Many Florida homeowners expected relief from the higher property insurance bills that followed the busy 2004 and 2005 hurricane seasons. But more than 4 million homeowners are about to get hit by rate hikes and disappearing coverage. State regulators have approved $718 million in rate increases.  The insurance industry and its advocates blame the increases on nearly three years of government attempts to control rates. Florida insurers claim they have been losing money. A consumer advocate says those payments are inflated and add hundreds of dollars to individual homeowners’ bills. Most Florida insurers don’t need to publicly report those profits, but two that do posted earnings of $32 million despite telling state regulators their insurance operations lost $16 million and required double-digit rate hikes, the newspaper reported. Since 2005, more than 2 million Florida families have been dropped by their carriers while the average statewide premium has increased 44 percent. In coastal regions, rates have doubled and tripled.

Since 1998, Florida insurers have collected $20.5 billion more than they paid back in claims, $18 billion of that since 2005. Yet the industry still says it is losing money, according to the newspaper’s report. Last month, Insurance Commissioner Kevin McCarty told Florida officials that the market remains in a slump, with 58 percent of carriers reporting losses. When seeking rate increases over the past year, insurers have cited sinkhole losses, mitigation discounts and increasing expenses for reinsurance, which is the coverage they buy from unregulated corporations that agree to pay their hurricane losses. The largest increase to a for-profit carrier was $88 million approved this month for Universal Property & Casualty.

State Farm’s most recent rate hike is expected to generate $73 million in new revenue on top of a 29 percent rate increase last year. The current increase, an average 21 percent, applies only to customers with discounts for using storm shutters or other protective features on their homes. The insurance industry and its advocates blame government attempts to control rates.  “When you charge artificially suppressed rates, it creates water behind the dam,” said former House insurance chairman Don Brown, an ardent supporter of rate deregulation and consultant to Gov.-elect Rick Scott. “It continues to pile up.”

A Herald-Tribune review of U.S. Securities and Exchange Commission filings found several companies that told investors they were profitable while telling state insurance regulators the opposite.

Universal Property and Casualty declared $11.3 million in insurance losses for its insurance company subsidiary. But after adding back in the money Universal pays itself for management services, the company told stockholders in SEC filings that it made $29 million before taxes the first half of 2010, the newspaper reported. The holding company was still posting profits in November when its insurance carrier asked regulators for a 14.9 percent hike. Homeowners Choice similarly declared a $4.8 million loss as of June 30, but SEC documents show it told investors its holding company made a $3.2 million pre-tax profit, according to the Herald-Tribune. Both were granted rate hikes.

Most Florida-based insurance companies now are set up to pay sister companies for management services, claims adjusting or other tasks. These companies often have the same owners as the insurer and operate with no employees of their own.  Because payments to affiliates are set as a percentage of premium, any rate increase to homeowners is also an increase in what the affiliates get paid.  The Herald-Tribune documented $1.9 billion in such payments in 2008 alone.


Michael E. Dortch
President &  Managing Agent
Corporate Home Office
618 South Broad Street
Lansdale, Pennsylvania  19446
(800) 807-0762  ext. 602