Maxwell: Florida Homeowners Get Stiffed — And Gaslit — On Property Insurance

For years, Florida journalists have done the job that the state’s so-called insurance “regulators” have not — trying to reveal what’s really going on with Florida’s insurance industry.

There’s the obvious stuff, like sky-high salaries for insurance executives while the industry is claiming it can barely make ends meet. (See this story: “Insurance CEO paid $50M as Florida homeowners struggle with soaring rates.”)

But journalists have also exposed more complex issues. Here are three big ones:

1) Many homeowners involuntarily became customers of start-up companies without proven track records, thanks to the state’s decision to offload customers of the state-run Citizens Property Insurance Corp. Forget names like Allstate and State Farm. Many homeowners suddenly found themselves paying much-higher rates to companies that didn’t even exist a few years ago.

2) Some companies play shell games with their profits, shipping them out of state to make it look like they’re struggling to get by in Florida — and get help from the state hiding that information as well.

3) There are questions about whether some of these new companies could even pay all their claims if a big disaster strikes, with the state keeping that information hidden as well. You can’t, for example, find out if your own insurer failed the state’s financial “stress tests.”

Maxwell: Florida’s insurance mess — big salaries, missing flood insurance, underfunded companies

And now a new report from CBS News has tied all three of those issues together in an exposé: “Florida homeowners were forced into a new insurance company. Whistleblowers say it siphoned millions in profits.”

The most eye-popping part in this piece was that the whistleblowers weren’t low-level staffers. They were the former CEO and CFO.

We’ll talk more about that story in a moment. But first, let’s look at the narrative Florida’s insurance industry is spinning these days — basically that everything is awesome.

Forget the fact that Florida has some of the highest insurance rates in America. Insurers and their political allies are pushing a P.R. campaign that you’re living in some kind of low-cost utopia.

You’ve seen some of the headlines in this very newspaper, like this guest column from the head of the Florida Chamber of Commerce: “Floridians are benefiting from insurance reforms”

And this one from the president of the Professional Insurance Agents of Florida: “DeSantis insurance reforms are working”

Gov. Ron DeSantis also put out a press release, claiming “Florida’s Reforms Deliver Results”

Forget what your actual bill says. The insurance lobby wants you to know you have it good … a claim that is, not surprisingly, confusing many people.

One reader responded that the insurance lobby’s narrative contradicted his reality, saying his insurance bill had gone from $3,400 to $4,839 in the last two years alone — after the governor’s “reforms” took place.

Another said: “My insurance premiums have continued to increase every year.”

So how can both things be true — that most people have seen continually raising rates while the governor and insurance industry are citing cuts?

Because the governor and industry are cherry-picking data.

After the governor and GOP-led Legislature enacted their version of “reform” — which consisted primarily of making it harder for you to sue your insurance company — rates continued to rise for nine consecutive quarters.

Home insurance costs in Florida spiked in third quarter. Are more increases on the way?

Remember: Rates were already high back in 2022. Yet on the heels of their “reform,” rates rose 1% to 5% every three months for more than two years.

Finally, after rates surged 40% collectively, the hikes stalled and even dropped in a few instances. THAT’s when the politicians and insurance lobbyists launched their PR campaign.

So to recap the industry’s response to quarterly price hikes over the last three years, it went something like this:

Rates increase 3%. Silence.

Rates increase 4%. Silence.

Rates increase 4%. Silence.

Rates increase 5%. Silence.

Rates increase 3%. Silence.

Rates increase 3%. Silence.

Rates increase 1%. Silence.

Rates increase 1%. Silence.

Rates increase 3%. Silence.

Rates finally drop 1-2%. “LOOK HOW LUCKY YOU ARE! WE TOLD YOU ‘REFORM’ IS WORKING.”

Basically, you’re being gaslit.

There have been some positive developments. While the state moved most Citizens customers into higher-priced, private alternatives, Citizens recently dropped rates for those who remain. Also, rate hikes among private insurers have recently slowed and, in some cases, dropped. (Again, after first skyrocketing.) And now that companies know they can treat customers how they want with less risk of getting sued, more entered the Florida market.

But many of of the new companies are untested startups, some of whom ship massive chunks of their profits to “affiliated” corporate entities in other states to make it look like they’re making less here.

That’s a big part of what the former execs were claiming in the recent CBS News piece on Trident Reciprocal Exchange, a Lake Mary-based company that started just two years ago.

CBS reported the strategy involved “diverting millions of dollars in customers’ premium payments to investors — dollars that are supposed to be used to pay future claims. The whistleblowers say that this exposes the company — and homeowners — to the risk of insolvency.”

Trident said the accusations were bunk, that the CEO was disgruntled after the company accused her of making deals to enrich herself and her husband, and that paying out-of-state affiliates is “standard practice.”

That last part might be true, but it doesn’t make it right. In fact, after Florida newspapers exposed companies that were shipping profits out of state while crying poor back home in Florida, lawmakers from both parties vowed to force more transparency … but then didn’t.

Sen. Carlos Guillermo-Smith, D-Orlando, sponsored a bill that would’ve required financial disclosure. But that bill died. Smith said the companies “don’t want to answer questions about their profit-shifting practices.” And apparently their pals in the Legislature were happy to accommodate them.

The politicians may be OK with secrecy, but journalists will continue pushing for answers. I know we will. The Orlando Sentinel and Sun Sentinel are teaming up for a year-long investigation into what’s really going on in this state’s pricey insurance market.

In the meantime, you can look at your own bills to decide whether you’re any better off than you were before the state’s “reform” took place.

How Florida property insurers keep secrets from policyholders — with the state’s help

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