Insurance payments and the call for reform

Insurance company financial dealings

FOX 13's Craig Patrick shows us new data dealing with how the financials work with Florida's insurance companies.

TAMPA - Florida made it harder to sue insurance companies and offered them more state subsidies, because they said the industry was in financial distress.

The backstory:

But recently released state data and some independent research from Weiss Ratings call that into question.

For background, some of the large, established, nationally known home insurance brands pulled back or pulled out of the Florida market years ago after a rash of hurricanes. Smaller, lesser-known companies filled some of the void.

"You may have a hedge fund that is anchored offshore. They may be domestic, but they’ll own a holding company, and the holding company now owns 7-8-10 different companies. One of them is the insurance company," said Doug Quinn who leads the American Policyholder Association.

And some of those insurance companies make money, then pay their sister companies – which may be a mix of administrators, adjusting firms, reinsurance firms, or restoration companies. In doing this, money moves from the insurance business where there are caps on profits, strict regulations, and risk of claims loss, to its sister companies where there are not.

"And listen, it’s all good as long as you are honoring your policies," Quinn noted.

But in prior years, we've seen some insurance companies pay their sister companies, as those same insurance companies went broke, as competition shrank, and prices shot up.

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Some state lawmakers did not know much about that when they passed reforms that made it harder to sue insurance companies and offered additional state subsidies.

What they're saying:

"We’ve been trying to solve the problem without the actual data to support the information," said State Rep. Hillary Cassel.

Before the reforms of 2022, state regulators examined 53 companies from 2017-2019. If you remove the outliers, the companies did collectively lose $432 million, but their affiliates made $1.8 billion. If you count the outliers, the insurance companies made $61 million, while the affiliates made $14 billion. Again, state lawmakers did not know about that when they passed the 2022 reforms, because the state office of insurance regulation did not release their findings until well after the reforms passed, in response to a Tampa Bay Times/Miami Herald records request.

As belated and revealing as that state report may be, it only partially reveals insurance companies’ financial dealings. It cuts off in 2019, and it only tracked lateral payments to subsidiaries, not payments up the chain to holding companies and owner groups.

A more recent study by Weiss Ratings looked at 2023. It found Florida insurers paid their affiliates $1.8 billion, plus another $335 million paid out in dividends to investors.

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For perspective, Weiss found that affiliate payments were more than 20 percent (20.4%) of their total expenses—four times higher than companies in other states.

Weiss research also found that in 2021 companies paid out $295 million in dividends while reporting steep losses. In 2022, it found $213 million paid in dividends while collectively reporting steep losses, and in 2023, another $335 million in dividends while turning a collective profit of $160 million.

"Companies often question the source of our information, but it’s from their own official statements they file with the states and the National Association of Insurance Commissioners. It’s damning data, and I trust it will be thoroughly investigated by the legislature," said Weiss Ratings founder Dr. Martin Weiss.

What's next:

In 2023, the legislature drafted legislation to require insurers to disclose their financial stability, profits, and payments to their sister and parent companies but then removed it. They said they were concerned about placing additional burdens on companies in financial distress.

The Source: FOX 13 reporter Craig Patrick researched the information for this article.

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