A 2022 study compiled at the request of Florida insurance regulators that reported insurers sent hundreds of millions of dollars to shareholders amid rising market instability has fueled new efforts to roll back recent tort reforms.
The report, which was assembled by Connecticut-based Risk & Regulatory Consulting LLC, was made public by the Tampa Bay Times and Miami Herald after a public records request. It analyzes fees paid to insurers’ affiliates during the period of 2017 to 2019 and indicates that $680 million in dividends were paid to the property insurers’ shareholders during that time, when the companies were facing mounting losses as a result of hurricane damage and other factors.
In addition, insurer affiliates recorded about $14 billion in net income during that period, when losses were often used to justify rate increases on consumers.
The Insurance and Banking Subcommittee of the Florida House of Representatives is now investigating information in the draft report. And the report’s critics say it is being used to reverse recent tort reforms that have been credited by the insurance industry with stabilizing the market and flattening premium rates.
Mark Friedlander, senior director of media relations for the Insurance Information Institute (Triple-I), labeled the report misleading and incomplete. The report offers only partial financial data for how managing general agents (MGAs) and affiliates earned their compensation during this time period, detailing only the revenues they earned but not identifying expenses, according to Friedlander.
“It was written by a consultant that apparently has no knowledge of insurer operations,” he told the Florida Record in an email. “The reporter who broke the story a few weeks ago was briefed by insurance experts that explained the problems with the report but did not include any of this in his article and created a false narrative that continues to escalate.”
MGAs perform multiple tasks for insurers, including work with retail agents, underwriting, policy issuance, collections and claims adjusting, Friedlander said, adding that there is nothing inappropriate about such relationships or the payment of compensation to them.
“Florida has more regional home insurers than most other states,” he said. “They rely on MGAs and affiliates to sell their products more than national insurers do. So the fees and commissions paid in Florida are going to run higher than in other states on average.”
Friedlander stressed that the “risk crisis” within the Florida insurance market during the time period in question was the result of man-made factors, such as legal system abuse and claims fraud, as opposed to fees and commissions paid to MGAs and affiliates. And now trial attorneys who serve as elected legislators are using the report as ammunition in the debate over whether to reverse some of the tort reform measures passed in the last two years, he said.
“In conjunction with several bills being considered by the House, their mission is to blow up the tort reforms that have stabilized Florida’s insurance market so they can regenerate the flow of revenue to their law firms from one-way attorney fees by suing insurers,” Friedlander said. “This is a self-serving conflict of interest and not in the best interests of their constituents.”
The report offers multiple recommendations to regulators, including a request that they obtain more documentation to assure that MGA agreements are fair and reasonable.
“The Office (of Insurance Regulation) should consider obtaining the missing information or conducting limited scope examinations to review the reporting of insurers, transactions with affiliates, and expenses associated with payments to those affiliates,” the report says.