In a current report back to stockholders, insurance coverage large Progressive used a phrase that each firm would like to keep away from: Refund.
An announcement filed by the corporate with the U.S. Securities and Change Fee warned that premiums collected from its auto insurance coverage policyholders may exceed what’s allowable by Florida regulation over three years, Insurance coverage Journal first reported earlier in August.
If that seems to be the case by way of 2025, the third 12 months, Progressive might need to challenge money refunds or present credit towards future premiums, the corporate stated.
Refunds on insurance coverage premiums? What an idea. The place can Florida residence insurance coverage clients join?
It seems there’s a regulation that may require property insurers to supply refunds in the event that they make extra income. However these income must come from insurers’ underwriting actions — the nitty gritty of evaluating and pricing threat.
And specialists say the state’s prime insurers generate nearly all of their income from investments and spin-off corporations that carry out the majority of their features, like speaking with policyholders, offering reinsurance protection, providing finance phrases and repairing injury — actions that aren’t topic to any refund regulation.
Florida householders would doubtless accept a notable discount in insurance coverage premiums after years of will increase. In South Florida, it’s not unusual for householders to be paying $7,000 and extra for protection. If they’ve a mortgage mortgage, they haven’t any alternative however to stay insured.
However as an {industry} that urged legislative reforms three years in the past celebrates a exceptional return to profitability, there are scant indicators — to this point — that their clients have been invited to share the bounty.
Insurance coverage insiders urge shoppers to attend just a bit whereas longer. Market capitalism will come to the rescue, they are saying. Competitors from 15 new corporations — and counting — fashioned on account of the reforms will drive costs down, they are saying.
Insurers are worthwhile once more
Reforms enacted by the Legislature in 2022 and 2023 had been meant to cut back litigation charges that had grown uncontrolled, forcing insurers to lift premiums in Florida far quicker than some other state over the previous decade.
Reinsurers, the deep pocketed funds that promote insurance coverage to the insurers, had been rising their charges. Because the 2022 hurricane season approached, {industry} leaders questioned whether or not some insurers may not be capable to acquire sufficient reinsurance to fulfill the state’s insurance coverage regulators.
Trade leaders now say the reforms are working.
In the course of the first half of 2025, the variety of lawsuits filed towards insurers of all sorts decreased by 29% in comparison with the primary half of 2022.
Florida’s home insurers reported a mixed web revenue of $944 million in 2024, Insurance coverage Commissioner Mike Yaworsky reported in June. That’s up from $292 million in 2023. In 2022, the {industry} posted a $741 million web loss.
Sufficient cash is coming in that 29 corporations filed to cut back charges and 44 requested no change since January 2024, Yaworsky says.
In its evaluation of Florida {industry} tendencies in 2024, world reinsurance dealer Gallagher Re reported policyholder surplus — the sum of money insurers should cowl their obligations — elevated from $7 billion in 2023 to $13.1 billion amongst corporations working within the state final 12 months.
Ordered to chop charges
Florida underwent an analogous insurance coverage price disaster within the aftermath of 2004 and 2005, when eight hurricanes struck the state. Again then, house owner premiums averaged lower than $1,600.
In 2007, newly elected Gov. Charlie Crist known as the Legislature right into a particular session to enact reforms to cut back prices, together with many who insurers disliked and would later foyer to repeal.
One of many reforms, which stays on the books, requires property insurers to refund extra revenue. However the regulation units a virtually insurmountable bar earlier than the refund requirement is triggered: the insurer should submit sustained underwriting income over a 10-year interval.
Lobbyists and industry-friendly legislators made certain to slender refund prospects solely to revenue generated by underwriting actions, shielding funding earnings and revenue that insurers earn from their different features, says Steve Geller, a plaintiff lawyer and Democrat who represented elements of South Florida within the state Senate when the regulation was enacted in 2007.
“The insurance coverage {industry} solely agreed to [the excess profit provision] as a result of they knew that they’d by no means should pay something out underneath it,” Geller stated. “They shoot for a 0% underwriting achieve and make their cash on funding earnings.”
Requested whether or not extra revenue might be discovered underneath the language of the 2007 regulation, Safety First Insurance coverage chairman and CEO Locke Burt responded, “Every thing is feasible. Nevertheless it’s a excessive bar.”
Common Property and Casualty, one of many state’s largest house owner insurers, is an instance of how corporations can report underwriting losses whereas nonetheless turning a revenue.
The corporate’s 2024 annual report exhibits it earned a web revenue of $58.9 million final 12 months, down from $66.8 million in 2023 however up from a $22.3 million web loss in 2022.
But Common’s report additionally indicated that the corporate misplaced cash performing its core insurance coverage operate whereas producing its revenue from funding and repair operations. In the meantime, the typical statewide premium that the corporate costs householders elevated from $3,270 through the second quarter of 2022 to $4,634 three years later, a 42% enhance.
The enterprise mannequin described by Geller generated controversy final spring after the Workplace of Insurance coverage Regulation launched, for the primary time, an independently produced report from 2022. It asserted that 52 insurers claimed a collective $432 million web loss from their core operations whereas 51 of them earned $1.8 billion by funneling premiums by way of spin-off corporations or their holding corporations.
Burt, nonetheless, says the Workplace of Insurance coverage Regulation evaluates fee requests and ensures that no firm makes greater than a revenue margin starting from 4% to five%, no matter investments or what features are spun off.
“Every fee submitting is over 2,000 pages lengthy, and it needs to be filed underneath oath,” he stated. “And I can let you know, the [Office of Insurance Regulation] seems at them very intently.”
The opinions Burt talked about take a look at whether or not charges are ample to cowl projected income and losses sooner or later, says Elliott, the Workplace Insurance coverage Regulation spokesperson.
A evaluation primarily based on the 2007 statute would take a look at how corporations carried out compared to their projections.
Elliott stated she is unaware that any refunds have been ordered underneath the 2007 statute.
In the meantime, CEOs take residence thousands and thousands
That also leaves the query of why some corporations can reward its executives with thousands and thousands of {dollars} in compensation that far exceed the 4% to five% allowable revenue that Burt says is baked into regulators’ evaluation course of.
Bruce Lucas, CEO of Slide Insurance coverage and its holding firm, Slide Insurance coverage Holdings, collected $50.3 million in wage, bonuses and firm inventory for himself and his spouse Shannon, who serves as Slide’s chief working officer, for work in 2023 and 2024, based on a prospectus the corporate launched in June forward of its preliminary public inventory providing.
The corporate reported a mixed web earnings of $288.5 million for the 2 years.
Elliot stated the Lucases’ compensation was paid by Slide’s holding firm, not the insurer. Florida’s insurance coverage regulators, she stated, haven’t any regulatory authority over what holding corporations pay their workers “at any degree.”
When requested concerning the compensation in June, Lucas and spokespersons working for Slide stated an SEC-ordered “quiet interval” barred them from responding. Final week, spokesman Doug Donsky was extra direct when requested by e mail whether or not any of the $50.3 million ought to have been refunded to policyholders.
“It’s the firm’s coverage to not talk about compensation or different inside issues,” he stated.
Current monetary statements of different publicly traded Florida-based insurers confirmed excessive ranges of govt compensation, together with bonuses and shares, although none as excessive as what Slide reported.
Common’s CEO Stephen Donaghy earned $4.5 million in 2024, equal to about 13% of the corporate’s web revenue final 12 months.
Heritage Property and Casualty CEO Ernie Garateix earned $4.3 million, about 7% of the corporate’s reported web earnings of $61.5 million in 2024.
And American Integrity Insurance coverage Group paid its CEO Bob Ritchie $1.9 million in 2024, 4.7% of the $39.6 million of web earnings reported final 12 months by the corporate, which went public in Could.
Lobbyist name extra revenue legal guidelines ‘anti-capitalism’
Many states have extra revenue legal guidelines and Florida has ordered refunds from insurers who overcharged up to now.
In 2024, Florida insurance coverage regulators ordered Liberty Mutual to refund $4.7 million after the state discovered it overcharged on 46,053 auto insurance coverage insurance policies.
In 2009, Hartford Monetary was ordered to return $48.2 million to companies overcharged for employees compensation protection between 2004 and 2006.
If Florida insurance coverage regulators utilized the identical refund requirement to property insurers because it applies to auto insurers, fairly a couple of policyholders may be owed refunds in a couple of years.
The regulation states that if an auto insurer stories revenue within the three most up-to-date years that’s larger than its anticipated underwriting revenue plus 5% of earned premiums, it should refund the surplus revenue.
Reaching its present revenue degree by way of the tip of the 12 months may require Progressive to refund 6% of the premiums it charged, calculates Birny Birnbaum, director of the Middle for Financial Justice and former client consultant on the Nationwide Affiliation of Insurance coverage Commissioners.
Elliott says that Florida insurance coverage regulators are “ a course of” to evaluation property insurers for extra income “because the market has improved and insurers are beginning to present income.”
She added, “Take into account that the evaluation interval for residential is 10 years, so corporations would wish to indicate good efficiency for a sustained time frame.”
Competitors from Florida’s newly aggressive — and worthwhile — insurance coverage market will save policyholders a lot cash that they received’t have to fret about refunds, a number of insurance coverage insiders stated.
Burt, the top of Safety First Insurance coverage, predicted that the entry of 15 new property insurers will result in insurance coverage prices which might be as little as they will get. “In a free market that’s comparatively simple to enter, competitors removes extra revenue,” he stated.
And Lisa Miller, a former deputy insurance coverage commissioner in Florida who now runs a consulting enterprise, concurred.
“Charges are going to come back down, completely,” she stated. “It’s competitors. It’s steady reinsurance charges. The market’s smooth. I’m very inspired.”
However state Rep. Anna Eskamani, a Democrat serving within the Republican-dominated Florida Legislature, stated that insurance coverage corporations ought to be required to refund extra income.
She referred to the 2022 report that stirred up the Legislature earlier this 12 months however didn’t result in any reforms.
“Any regulation forbidding an insurance coverage firm from incomes an extra revenue is meaningless if the corporate can dodge it simply by shifting cash from one company pocket to a different,” Eskamani, who represents elements of the Orlando area, informed the Solar Sentinel. “We will and will put a cease to those monetary shell video games. All it takes is a governor and extra lawmakers keen to prioritize reasonably priced dependable insurance coverage for Floridians over bonuses and payouts for insurance coverage executives and traders.”
Elliott urged householders to buy round for a greater value.
“It’s advisable for shoppers to interact in significant dialog with their brokers yearly, at minimal, to debate their insurance coverage wants and see what choices can be found to them, for the most effective value, as a result of their choices are rising,” she stated.
Ron Hurtibise covers enterprise and client points for the South Florida Solar Sentinel. He might be reached by telephone at 954-356-4071, on Twitter @ronhurtibise or by e mail at rhurtibise@sunsentinel.com.
