TALHASSEE — State regulators told lawmakers Friday that the state report showing insurance companies were losing money was incomplete because their affiliates “flew billions of red flags” but were incomplete because it wasn’t over.
During the three-hour hearing, current and former Florida insurance commissioners were grilled by Republicans and Democrats on why the report was revamped and not given to Congress in 2022.
“As a lawmaker, I think it’s outrageous, we’re getting something very outdated and flawed,” said Rep. Mike Caruso of R-Delray Beach.
Last month, Times/Herald revealed an unprecedented state report. This found that insurers poured billions of dollars into affiliate companies while claiming they would lose money between 2017 and 2019 when the state’s insurance crisis began.
In response, House Speaker R-Miami Daniel Perez ordered a House committee to investigate whether insurance companies were using “accounting tricks” to hide their profits.
The first study was commissioned in 2021 by former insurance committee member David Altmaier after hearing concerns about the use of insurance companies affiliate companies.
Insurers create affiliates that claim the insurance company for basic services such as claiming claims and creating policies.
The state paid the consultant $150,000 to analyze the relationship. According to the email, the consultant submitted a report to the state on April 1, 2022.
The result was “certainly a few red flags,” Altmeyer told lawmakers.
“I think what we said is that there’s a lot of smoke here. You need to make sure the fire is on fire,” Altmaier said. “That was an effort I thought was ongoing when I left the office.” He left the office in December 2022.
However, the office did not investigate further. Instead, the report was left in the “draft” form and was never followed up.
Lawmakers repeatedly asked how that would happen.
“Why did the investigation stop?” said R-Tampa MP Susan Valdés. “Who made the decision to say, ‘This isn’t important enough’? ”
“I don’t think anyone has made that decision,” Altmeyer said. “Frankly, when asked to come here today and talk, that’s one question I couldn’t come up with an answer.”
Altmaier, who began consulting for insurance companies three months after he left office, said he couldn’t recall talking about it to the office of his successor, Insurance Regulatory Commissioner Mike Yaworsky.
“Hidewitness for 2020, if I could go back and try again, I might have called him and said, ‘Don’t forget to finish that report,'” Altmaier said.
Yaworsky said the regulators could have been dropped as they were understaffed and dealt with the height of the insurance crisis that year. After the report was prepared, lawmakers met twice in an emergency legislative session in 2022, passing the reforms that made it difficult for the insurer to sue.
Some lawmakers at the time questioned the role of affiliate companies in the insurance crisis.
The Times/Herald first requested a report in November 2022 under the state’s public records laws.
Yaworsky said he had not noticed the report until October 2024. That’s when The Times/Herald’s lawyers demanded that the state take over it.
The firm said it was not present in Times/Herald’s attorneys before providing a seven-page executive summary of the report last December.
Several lawmakers asked Yaworsky why it took him more than two years to take over the records. He didn’t know, but said he took “ownership” due to the shortage and then the office streamlined its response to record requests.
Yaworsky and Altmaier said the report was not perfect and could never be given to lawmakers.
This report was created by a consultant for $150,000. The authors found that the insurer in the study showed a net loss of $432 million, minus some national outliers, while the affiliates showed a net profit of $1.8 billion. The insurance company also spent $680 million on dividends to shareholders over the period.
As a result, some insurers could be financially weak and unable to pay their claims, but they were able to justify a larger rate increase.
The authors of the report concluded that most arrangements between Florida-based insurance companies and their affiliates are not “fair and reasonable” under the understanding of state regulations.
Yaworsky said the report was a “good office initiative” to better understand the industry, but he opposed the author’s methodology.
“I don’t mean that the conclusion is wrong or wrong,” he said.
Yaworsky said 23% of insurance companies were flawed because they either didn’t respond to the office’s information request or didn’t provide limited data.
The state has not updated its analysis since then, but Yaworsky said that if lawmakers wanted it, they would do it “happily” every year.
“I think we’re all screaming,” Caruso replied.
Brad Yeager, chairman of R-New Port Richey, said the House Insurance and Banking Subcommittee will continue to hold hearings, including hearings from insurance executives.
“I’m not satisfied until I get to the real truth and get an answer about this,” Jager said.
Inappropriate use of insurance companies’ affiliate marketing is known as “general agent management,” but has been cited in many companies’ bankruptcies in the past.
In 2013, the Department of Insurance and Regulation fined Universal Property & Casualty Insurance Co.
“If you are an insurance commissioner and you have no concerns about holding company arrangements, MGA (general agent management), and perverse incentives that may exist in related transactions, you should not do your job,” Yaworsky says. “It’s always in my heart.”
Since 2022, the office has pushed for more surveillance for these affiliate companies, but lawmakers have not allowed some of the tools the office has requested. Yaworsky again calls for state law to define “fair and reasonable” services. This will keep the company accountable.
However, Yaworsky said in recent years it was not due to affiliate marketing. He and Altmeyer said excessive lawsuits, storms and rising costs were the reasons why businesses went out of business.
Ultimately, Florida is one of the most volatile insurance markets, Yaworsky said, and contracts with affiliate marketing are known to attract investors.
“How many would you like to invest that $100 million in Florida’s domestic fortune that you might not return?” he asked.
R-Tampa’s Rep. Karen Gonzalez Pittman raised his hand.
“After reading the MGA (Management of General Agents), I’d like to invest.”
