Florida insurers steered money to investors while claiming losses, study says
101 comments
·February 22, 2025loeg
cptskippy
This practice is pretty common in auto insurance. The company you wrote your policy with is usually broker and your ID car will list the actual Insurance Company. If you go through an independent agent you'll encounter 3 layers of abstraction where the agent writes business for multiple brokers who manage books of business for different insurance companies.
iask
I think the elephant in the room is fraudulent claims. Majority of the claims filed is related to over-priced contractors. Pick any city, pick any house - old, new, big, small, tiny - the average roof replacement is 4x-5x the cost!
I know of multiple cases where the adjusters send in claims that are 50% to 90% of the actual repair cost. This is the REAL problem. Not hurricanes. It’s the fucking fraud.
I think the only option to combat this is to give home owners the right to fix things like roof themselves…why do I need a city permit, why do I need a fraudulent contractor permitted ONLY by the city (I don’t want the city looking out for me…that’s always their BS argument…leave that to me). I should be able to shop the supplies myself.
Here’s another exercise - pick any city in FL - try to buy roofing materials yourself.
The point is - Fraud is the biggest problem with homeowners insurance in the state of FL.
loeg
Florida significantly reformed insurance/claims in 2023 to reduce fraud. Senate bill 2A prevents assigning insurance claim benefits to 3rd parties, which was a significant source of insurance fraud.
jfengel
That seems impossible. I have been assured that only government pays fraudulent claims. The invisible hand ensures that corporations will root out fraud.
mlinhares
The elephant in the room is that hurricane insurance shouldn’t be a for profit business because no business can survive multiple cities being destroyed by a hurricane, this money should have been driven to a state fund that pays out when disaster strikes and the private insurance business should insure only the usual stuff.
1123581321
Public home insurance with unlimited risk appetite would create a hazard as too many people would move and build carelessly. For public health and financial reasons, the state of Florida shouldn’t encourage this.
Reinsurance already covers excess claims before an insurer exits the market. There is no systemic risk from an insurance confidence crisis as there was in banking pre-FDIC.
Any suggestion to compensate with additional burden on homeowners (“just charge them more”, “require stricter building codes”) can be handled by existing insurance regulation.
mlinhares
Oh yeah, because the "collect hurricane insurance, spend all the money, go bankrupt" pipeline has worked wonders in Florida.
The government already foots the bill when insurance doesn't cover the costs (which is every single time here in Florida) and when there is no insurer anymore Citizens Insurance (the government plan) also covers it.
Homeowners insurance wasn't made for natural disasters and the fact we continue to make it so only fills the purses of the fraudsters running the scams. The moment there is no more free money for these insurers in Florida the market will change overnight.
whimsicalism
democracies generally will not be able to insure at a sufficient level. i'm opposed to having the government force me to subsidize others poor choice of environ. if someone wants to live in a fire-prone or hurricane-prone area, that is their choice and they should be exposed to the true cost of insuring themselves and hopefully this will cause people to move somewhere safer instead or make changes (like a sturdier home, clearing brush, etc.) that reduce their rates.
jghn
It's not an elephant in the room. The fact that half of the populace is too brainwashed and/or stupid to understand truths like this is the elephant in the room.
quickthrowman
> why do I need a city permit, why do I need a fraudulent contractor permitted ONLY by the city (I don’t want the city looking out for me…that’s always their BS argument…leave that to me). I should be able to shop the supplies myself.
You are not the only person that will own the house you live in, that’s essentially what permits and regulations are for, to ensure the next owner isn’t saddled with a stupid decision made by the previous homeowner. Roof inspections are particularly important in places with snow load or hurricane force winds.
Roof claims are prorated, if your previous roof was rated for 30 years and installed 15 years ago, you get half of the replacement cost paid.
If you don’t like it you can pay off your house and self-insure your residence. If you don’t like cities, go buy land and build a house in an unincorporated area, there are places that completely lack any local building code enforcement.
iask
You are not the only person that will own the house you live in, that’s essentially what permits and regulations are for, to ensure the next owner isn’t saddled with a stupid decision made by the previous homeowner. Roof inspections are particularly important in places with snow load or hurricane force winds.
That’s what home inspectors are for at the time of purchase. And even if I choose to replace the roof myself - the city is free to inspect according to their ordinances. What I disagree with is that you MUST use their approved contractors.
And the prorated nonsense is simply mathematical fraud.
quickthrowman
> What I disagree with is that you MUST use their approved contractors.
Who is ‘they’, the city or the insurer? The state I live in does not have approved contractors by jurisdiction, if you have a state license and any city specific licensing, you can pull a permit in that jurisdiction. Perhaps Florida is different.
If the contractors are mandated by the insurer, the fault lies with state law. In my state, insurers must use OEM replacement parts for car insurance repairs if the customer wants them to, this is due to state law. Likewise, my car insurer has recommended repair facilities, but state law forces them to allow me to choose where I have my car repaired under an insurance claim.
It’s understandable why the insurer wants only approved contractors (helps control costs), but your state could force the insurer to allow any contractor to do a repair covered by insurance by passing legislation. Insurance rules are almost entirely state specific, so blame your state government if you’re unhappy with the terms of your insurance policies.
cm2187
Not sure I agree with the article.
1) Making a loss doesn't prevent you from paying a dividend. Dividends aren't paid from the current year's profit, but from retained earnings, i.e. from accumulated profits since the creation of the company. It is frequent for companies to maintain their dividend policy through cycles.
2) The insurer doesn't have to make a loss overall to make a claim that the rates charged on some specific part of their portfolio do not cover expected losses on that portfolio, since circumstances have changed. In theory insurance rates must be sufficient to cover expected losses, and I am pretty sure financial regulations require insurers to do so (prudential rules/solvency, though I do not work for an insurance company so not an expert).
So it is one thing to call the insurers claims bullshit, and maybe it is. But 1) they paid a dividend or 2) the company did not make a loss for the year, aren't valid arguments.
speff
> Regulators asked for that [better metrics] in 2023 but lawmakers rejected it, claiming it would “upset the apple cart” of Florida’s insurance industry.
I don't disagree with the lawmaker's stance on this one. FL's in a bad spot where home insurance in particular is unsustainable given the increasing threat from climate change. Why would I want to run an insurance operation in FL without an actual incentive (read: more money)? There ARE going to be multiple city-leveling hurricanes in the future - how do people expect to be able to pay for this?
dsr_
You raise the rates on everyone to cover actual expected losses, and make sure that the insurance companies don't commit fraud.
Then people will say that they can't afford Florida. And they will be correct.
speff
Agreed, but it seems like the people of FL want a populist who will prevent the companies from raising rates[0][1]. What happens then?
It's rhetorical, since we see in this post's article what happens. But my point is that something like this was more-or-less inevitable.
[1]: https://www.flgov.com/eog/news/press/2025/governor-ron-desan...
[2]: https://www.floridapeninsula.com/blog/florida-legislation-he...
toomuchtodo
They want the socialism benefits wrapped in populist authoritarianism to appease their tribal and in group belief system. “The only moral benefits are my benefits.”
With Florida climate risk accelerating, the new admin telling states FEMA is unnecessary, and ~15-20% of Florida homeowners going without property insurance due to cost, this will manifest in an unfortunate but entirely expected outcome: catastrophic economic loss at some point in the future with no recourse for the majority impacted (citizen homeowners and GSE investors alike).
quickthrowman
> Agreed, but it seems like the people of FL want a populist who will prevent the companies from raising rates[0][1]. What happens then?
Eventually, property values would be drastically reduced and home insurance would be more per year than the mortgage. If it’s 80% mortgage 20% insurance premiums now, maybe it will flip to something like 35%/65% mortgage/insurance with property values halved (or more). I’m ignoring the fact that the replacement cost of a home has little to do with the property value since most of that value is in the land, but the land would also be worth less. Regardless, a shitload of mortgages would be underwater, impacting both lenders and borrowers on a massive scale. Vast amounts of wealth would be destroyed.
Or, property values remain the same and the poor have to leave Florida. This assumes there are enough people that can move to Florida and pay the same for a property with doubled or tripled insurance premiums, which is probably less likely than the first scenario I laid out.
SaintGhurka
>> What happens then?
Same thing that's happening in CA. Insurers pull out of the state and non-renew policies.
I'm sure it was satisfying to see the regulator stick it to the insurance companies, but you can't force them to write policies if they don't think it's worth it.
consumer451
> FL's in a bad spot where home insurance in particular is unsustainable given the increasing threat from climate change.
I was a South FL resident for half of my life. Either the insurance pool is spread across the entire country, subsidizing FL, or just stop.
FL will soon be uninsurable in the free market.
jhawk28
Only parts are uninsurable. If a house was built after 2005, it was done with updated hurricane codes. Most are built up higher, have hip roofs, and have their roofs strapped down to cinderblock walls with cement filled in the corners. All new roofs have a "sealed deck". The uninsurable are going to be on the coast (although you can mitigate this in a lot of cases) and low areas.
Side note: all insurance claims are subsidization.
bluedino
Isn't this what happened in areas of California?
consumer451
If I understand the situation correctly, yes.
The core of insurance is Lloyd's of London. They do the math, aka the re-insurance numbers.
If a retail insurance company can't get re-insurance for a local market, then they exit that local market.
That is what happened prior to the LA fires. The math saw it coming, re-insurance was pulled.
Both CA and FL are high-risk, and each have state-backed insurance systems of last resort. The more that these get tapped, the more unsustainable it all becomes.
Climate change, anthropogenic "or otherwise," sucks for insurance.
amluto
> There ARE going to be multiple city-leveling hurricanes in the future - how do people expect to be able to pay for this?
Are there?
As far as I can tell, hurricanes:
- Destroy buildings that are not properly designed and built to withstand enough wind. The industry and modern codes know how to deal with this for new and sufficiently retrofitted construction. I don’t even think the measures needed are particularly expensive.
- Damage to structures due to wind-blown rain. The more informed architects and engineers know how to deal with this. A very brief search suggests that even the Miami-Dade code hasn’t caught up: for example, you can still build a vented roof assembly in Florida. This is a poor idea in a humid climate even without hurricane, and those vents are problematic in a hurricane. Getting rid of them in new or remodeled construction is easy and not very expensive, but architects and builders need to learn how.
- Damage to structures due to flying things near them. In a city setting, this can be mitigated by building structures that don’t turn into flying junk and enforcing requirements for people to keep their yards clean.
- Flooding: this will cause massive damage to whole cities.
An interesting property of the issues other than flooding is that the most vulnerable structures may get destroyed by hurricanes, leaving behind the less vulnerable structures.
Clubber
This is accurate at the macro level, but on the micro level the insurance companies are doing nasty insurance company stuff like doubling rates in ~5 years, requiring people to replace their roofs every 10 years instead of every 30 years (at their own expense) and low balling claims expecting most people to not hire a lawyer to fight for them when their house is in shambles. They've really gotten shady over the last few years. These aren't fly-by-night insurance companies, these are companies you've all heard of that make hundreds of billions of dollars a year, companies with blue logos and red logos; how American.
The other problem is, as most of you may know, to get a home loan to buy a house, you are required by the banks to carry insurance. This makes it a near monopoly that these companies are taking full advantage of. I'm sure the legislature is happy to take campaign contributions from these companies to ensure the status quo. No one will get arrested. You know the drill.
I agree insurance will be more expensive in a hurricane prone area, but all the shady stuff is what people are complaining about.
jghn
As a state, they consistently vote for politicians who are anti-regulation and pro-capitalism. What do they expect to happen here?
hollywood_court
No one shoots themselves in the foot more often than GOP voters.
It’s wild to watch folks like my SIL (a teacher) and my BIL (a combat veteran with no other marketable skills) vote against their own self interests every time they select a GOP candidate.
These folks have spent decades doing everything they can to make life more difficult for teachers and veterans. Yet teachers and veterans will still line up to elect these people.
Clubber
I think the last Democrat who ran against DeSantis got caught smoking crack in a hotel room with a male hooker. Florida doesn't seem to have a lot of great choices. Pick the corrupt person, red or blue.
To be fair, a lot of Democratic politicians destroyed their economies with extended lockdowns, and also being extremely generous with prosecuting theft, among other things, so Florida isn't the only one with bad choices.
I'm not defending DeSantis, but it seems the job of US politician attracts a certain type of person, regardless of what color their flag is. The longer they stay in, the more comfortable they get with being, lets say, morally flexible.
OneDeuxTriSeiGo
[dead]
serjester
For some background, Florida is an incredibly challenging insurance market. In 2020, the state accounted for 85% of insurance litigation despite making up only about 10% of total premiums in the US. That combined with sky rocketing reinsurance costs, has driven tons of reputable carriers out of the state. They dodged a bullet with Milton - many of the remaining carriers are one big hurricane away from insolvency.
cptskippy
~20 years ago when I worked for an auto insurance broker, we opened a program in Florida and it was very challenging. I'm trying to remember the specifics but the regulations were such that you couldn't collect more than like 15 days of premium in the down payment and you were required to cover that policy for the first 30 days. So there was always something like a 15 day gap. This meant policies were cancelling after the first month and rewriting. They didn't have electronic approvals at this time so you couldn't implement any sort of real-time checks either. If your producer wrote a policy, you were on the hook for it. I think we introduced some by-fax validation process to mitigate this.
Another common practice for people who need insurance to register vehicle but had no intention of carrying insurance was to write bad checks. If the person was approved they'd basically have 30 days of coverage for free. If they had an accident they could pay the premium, if they didn't then they could let the policy lapse.
There was also something weird about the uninsured and underinsured coverage, I can't remember specifics but I think it was that the coverage was required due to the high number of people who drove uninsured but we couldn't charge for it? I can't recall exactly.
The regulations were such that it made it very hard to make money and I think we backed out of the market after 12-18 months.
howard941
Uninsured/underinsured is not required in Florida. It's good to have because it's the only coverage that actually benefits the insured - but it's not required. And it's not cheap.
s1mplicissimus
The logical outcome of shareholder driven economy. Reminds me of a youtube quote: "Sell the houses to whom, Ben? Aquaman?"
GenerWork
Not surprising in the slightest. Let's hope the legislature delivers the recommendation that the office is asking for, hopefully this'll help slow the raise in insurance rates and get people off of Citizens.
wheelerwj
Florida Insurers were running a Ponzi scheme, got it.
toomuchtodo
whimsicalism
again, government at fault. it is beyond stupid that GSE mortgage backstops even exist in the first place
dsr_
Sounds exactly like fraud.
maxerickson
I wonder how those rates of return compare to say Georgia and Wyoming.
(A state you'd expect to have reasonably similar risk and one where you'd not necessarily expect it to be similar)
bilbo0s
Average elevation in Georgia: 600ft
Average elevation in Florida: 100ft
Georgia coastline: 100 mi non-NOAA
Florida coastline: 1350 mi non-NOAA
Even when cheating with non-NOAA numbers, Georgia is nowhere near comparable to Florida. Most of the people in your pools in Georgia are not on the coasts, and live at non-dangerous elevations. Whereas in Florida, nearly all of the people in your pools live on the coasts, and at extremely dangerous elevations.
dmoy
For anyone else momentarily confused like me:
risk pools (which is evidently a term of art in insurance: https://en.m.wikipedia.org/wiki/Risk_pool)
Not swimming pools, which was my first read of above comment, at which point I thought, "well obviously I got something wrong there, time to look at Wikipedia"
bilbo0s
Sorry.
I should have been more clear.
Yes. Risk pools.
What I was trying to illustrate is that the fundamental model of sharing risk can work in a place like Georgia, whereas in a place like Florida it doesn't.
maxerickson
Okay, pick whatever state, but the interesting thing is looking at the rate the industry is pulling out profits at. Are the Florida affiliates 10 times more profitable or 100? And so on.
wonderwonder
What's interesting is the entire thing is a game. I live in Florida. Had a roofer come by a couple years ago saying that a storm had come through a few months ago and there had been hail. So if he goes up on my roof and is able to find proof of hail damage I get a new roof for free. I needed a new roof at the time so while I generally look poorly on solicitation, I told him go ahead. A month later I had a brand new roof that cost me $1,000 out of pocket instead of $25,000.
These guys must have done 10 roofs within a few streets of my house.
So while the 250k is not a lot for an insurance company to eat, I am sure when that is multiplied by 1000's over the state, it gets expensive.
With that said, I also had a flood (10 inches of standing water) during a storm and my flood insurance company denied my claim because my sunken living room was considered a basement (2 steps down from the main floor). Turned into an indoor pool. So that was a nice $50k I had to spend out of pocket. I even paid separately for flood insurance as my hoi does not cover flooding. So total waste of money on that.
The entire thing is a circle of people scamming each other.
jbs789
The roof stuff drives up prices massively. The MGA stuff is just the tool/response for the insurer to manage the downside for things like the roof nonsense - if they can pocket the fee when they write the deal then if there’s a subsequent rush of claims (some roofer, in some area, following some storm, which inflates claim costs), then the loss is capped at the equity they have in the insurance carrier.
bashmelek
My thoughts exactly. I live in Florida, and have for 30 years. I’ve never personally used my insurance, and my parents had to use theirs once when the neighbor’s tree randomly fell in our yard, and they also had their insurance pay for most of their roof-a lot of people do. I paid for my own roof fully out of pocket.
If you are near water or below ground then there is a near certain risk of flood, and I realize I subsidize those areas while I chose to stay away from water. But the entire national conversation is focused on saying that climate change has doomed Florida
bluedino
Your insurance company blindly cut a check and didn't send an adjuster out to see how old your roof was and deny the claim or pro-rate it to only pay 10% of the cost?
deepsquirrelnet
Between tariffs (nails) and a huge number of undocumented workers in the roofing industry[1], it’s all setup to fall apart pretty soon.
[1] https://www.roofingcontractor.com/articles/100311-reporting-...
idermoth
For those of us who live here, it's frustrating. Tons of scams and bullshit.
But we can name 10 recent transplants who built new, very large homes at water level in the past 5 years (ever wonder why they tell you hurricanes are getting more expensive??)
Then these same transplants scream bloody murder if the water gets close to their house. It has dominated political discussion in areas where, imho, these homes shouldn't even exist and other, less wealthy residents are lacking proper infrastructure maintenance.
Many of those transplants lost their shit after the recent hurricanes, even though anyone who is native knows it's always a possibility when you live 25 feet from the water at water level.
Then these same transplants want the cities to work impossible magic and "fix it." These same city officials, from my experience, are almost certainly in the pocket of big real estate investors.
Anyway, I get it. It sucks to flood out. But many of of these rich transplants clearly do not have the SLIGHTEST idea how the physics of water works. They're lucky it recedes so fast in my metro too.
selimthegrim
Well, this probably explains why those Koi pond entranceways fell out of fashion after the 80s
game_the0ry
Companies and their executives need to be held accountable of this will never stop.
No more bail outs and implement clawbacks.
emorning3
What the insurers are doing is all legal, what do you propose exactly?
Do you think that the current administration is going to 'hold executives accountable'?
Trump could literally drive over to your house and shoot you in the head for even suggesting such a thing.
Worth understanding this whole argument applies only to local Florida-only insurers; the big national entities don't operate like this and also found Florida too expensive to operate in prior to the 2023 tort/insurance reforms.
> So executives create sister companies that charge the insurance company for basic services, such as claims handling, underwriting, accounting and issuing policies. (Large national insurers typically handle all of those services internally.)