The Profit-Paying Game Behind Florida’s Property Insurance Crisis

How Florida Insurers Profited While Homeowners Paid the Price

For years, Florida homeowners have faced skyrocketing property insurance premiums, all while insurers claimed financial struggles due to lawsuits, fraud, and the state’s high hurricane risk. However, a previously unpublished 2022 report, recently obtained by the Miami Herald and Tampa Bay Times, has confirmed what many suspected all along—insurers were not just struggling; they were moving billions of dollars to their affiliate companies while raising rates.

As a Florida insurance claims lawyer with over three decades of fighting for homeowners, I’ve seen it all—denied claims, lowball offers, and insurers dragging their feet until policyholders give up. The narrative from the insurance industry has always been the same: “We’re barely scraping by—hurricanes, fraud, and lawsuits are killing us.” It’s a sob story they’ve used to jack up premiums and tighten the screws on homeowners already battered by storms and rising costs. While insurers were crying broke, they funneled billions to their affiliate companies and shareholders, leaving Florida homeowners to foot the bill. From where I sit, this isn’t just bad faith—it’s a calculated heist.

Billions in “Hidden” Profits: What the Report Revealed

According to the Miami Herald’s story, the 2022 report uncovered a massive financial discrepancy. Insurance companies operating in Florida were moving large sums of money to affiliate companies they owned. These affiliates often made a substantial profit, while the insurers claimed losses. The practice has raised eyebrows and concerns among Florida homeowners, with experts like Doug Quinn, executive director of the American Policyholder Association, describing the findings as a “smoking gun.”

Report Findings:

Between 2017 and 2019—after Hurricanes Irma and Michael—Florida-based insurers reported a collective net loss of $432 million. Meanwhile, their affiliate companies raked in $1.8 billion in net income, and the industry saw affiliates pocket a staggering $14 billion. Let’s not forget the $680 million in dividends handed out to shareholders during that period.

When looking at all 53 insurance companies in Florida, the numbers were even more shocking:

• Insurance companies reported just $61 million in net income
• Their affiliates made nearly $14 billion in profit

This means that while insurers cried poor, they quietly funneled money into their affiliated businesses to avoid financial scrutiny and justify raising premiums. The study’s author found that nearly two-thirds of the examined insurers had affiliate relationships that weren’t “fair and reasonable” under state law—a vague standard that’s never been clearly defined. Worse, this practice left many insurers financially fragile, teetering on the edge of insolvency just as Florida’s insurance crisis deepened.

We were told litigation and fraud were the culprits, yet the data showing billions flowing to affiliates was hidden from the public and lawmakers alike. It’s hard not to wonder if some regulators, caught in the revolving door between government and industry, had a hand keeping this quiet.

A Loophole in the System for Florida Insurance Companies

The problem is how insurance companies can move money between themselves and their affiliates.

• Insurers claim they’re losing money, citing factors like lawsuits, fraud, and hurricanes to justify raising rates or declaring insolvency.
• At the same time, they pay massive fees to their affiliate companies—which aren’t subject to the same strict regulations as insurers.
• Affiliate companies aren’t bound by the same 4.5% profit cap imposed on insurance companies. This allows them to report huge profits, even while their parent insurance companies claim losses.
• As a result, homeowners face skyrocketing premiums while insurers shift money behind the scenes.

Birny Birnbaum, executive director of the Center for Economic Justice, described the numbers as “eye-popping.” Of the 30 Florida-based insurers included in the report, 19 were found to be paying “unfair and unreasonable” fees to their affiliates.

The Affiliate System: A Long-Standing Problem

The practice of moving money between insurers and their affiliates isn’t new, but the recent revelations bring it to the forefront of public debate. The affiliate system allows insurers to siphon off money without any real oversight or regulation, a loophole that has long been criticized. While the profits of insurance companies are capped at around 4.5% by state regulators, there is no such cap on the earnings of affiliates and parent companies. This creates a clear incentive for insurers to route money through these affiliates while charging homeowners higher premiums to compensate for the alleged financial losses.

Why Was This Report Hidden for Two Years?

Perhaps the most disturbing aspect of this revelation is that the report was never made public.

• Florida’s Office of Insurance Regulation (OIR), which had access to the report, never shared it with state legislators.
• When questioned, OIR defended its decision, saying, “Our office does not release every internal analysis of companies to the Legislature.”
• Only an executive summary was eventually provided to the Miami Herald/Tampa Bay Times—and that, too, after a two-year wait for public records.

This raises serious transparency concerns. If state regulators knew about this financial maneuvering, why didn’t they sound the alarm earlier? Why did investigative journalism take so long to bring this to light? For $1,500, the report remains out of reach for most, prompting criticism that the state is effectively shielding the industry from scrutiny.

How This Impacts Florida Homeowners and Their Insurance Claims

This profit scheme isn’t just about high premiums—it directly affects homeowners trying to file legitimate claims. In my practice, the fallout from this scheme is a daily reality. I’ve got a Fort Myers client whose premium shot from $2,800 to $5,100 in two years. Their insurer blamed “market conditions” and dropped windstorm coverage, forcing them to get coverage from Citizens Property Insurance at an even higher rate. They’re one of thousands our firm has seen stretched to the breaking point, cutting corners on coverage or selling homes they can’t afford to insure. Meanwhile, the 2022 report shows their insurer’s parent company was likely laughing all the way to the bank.

• Claim Denials and Underpayments: Many homeowners are forced to battle their insurance companies after a hurricane, fire, or water damage event. We have concrete evidence that insurers weren’t struggling financially—they were manipulating their books. This means that claim denials and lowball settlement offers may not have been due to financial constraints but rather a strategic decision to keep more money in their affiliate companies.
• Insolvency and Policy Cancellations: Some insurers declared insolvency, leaving policyholders stranded even as their affiliates raked in massive profits. Several insurance companies have gone under in recent years, forcing homeowners to scramble for new coverage—often at much higher rates. How many of these “insolvent” companies had funneled money into their affiliates before closing their doors?
• Inflated Premiums with No Real Oversight: Many homeowners have been paying the highest insurance rates in the country while being told insurers are suffering financial losses. But this report proves that their parent companies and affiliates were making billions. Florida’s insurance industry is supposed to be regulated to prevent excess profits, but the affiliate loophole allowed companies to sidestep these rules completely.

The Real Cost to Floridians

This isn’t just a numbers game; it’s personal. Every time your premium spikes and a claim is denied, there’s a chance it’s tied to this scheme. Insurers use their “losses” to justify rate hikes, even as their affiliates thrive. When they drain their own coffers to pay affiliates, they’re less able to honor your claims, leaving you stranded after a storm. And when they go insolvent—as companies like FedNat and Southern Fidelity did in 2022. Policyholders are left scrambling for new coverage in a shrinking market.

Take Southern Fidelity, for example. Before its collapse, it was linked to affiliates that spent nearly half a million dollars yearly on a hunting lodge. That’s your premium money at work—not paying claims but funding executive perks. Meanwhile, Citizens Property Insurance, the state-backed “insurer of last resort,” has ballooned to over 847,000 policies, with rates still climbing despite recent reductions in some areas.

What’s Next for Florida Homeowners?

Florida’s insurance crisis has been worsening for years, with homeowners paying the highest property insurance rates in the country. While state lawmakers have made attempts at reform, the recent findings demand a stronger response. This scandal is finally getting attention. Florida House Speaker Daniel Perez has ordered hearings with subpoena power to dig deeper, and lawmakers like Senator Don Gaetz are pushing bills to demand transparency on executive pay and affiliate dealings. The OIR is asking for more oversight, too, proposing flat fees for affiliates instead of percentages that balloon with every premium hike.

Proposed Reforms on the Table:

Defining “Fair and Reasonable” Fees for Affiliates

Regulators are asking lawmakers to finally define what “fair and reasonable” means when insurers pay fees to their affiliates. This could help close the loophole that allows insurers to shift money unchecked.

Changing How Affiliate Fees Are Paid

• Right now, affiliate payments are often based on a percentage of premiums—meaning that as premiums go up, affiliates get paid more.
• A proposed reform would require insurers to pay affiliates a fixed dollar amount instead of preventing them from profiting because homeowner rates increase.

Increased Transparency & Oversight

Given how long this report was kept hidden, there are growing calls for more transparency in how insurance companies and affiliates report their finances. Homeowners deserve to know how their money is being used.

Without decisive action, insurers may continue to exploit these affiliates, leaving Floridians to pay the price. The newly published details are a potent reminder that transparency is essential for meaningful consumer protection.

Conclusion

If your premiums have jumped or your claim’s been denied, don’t just take it lying down. Contact our experienced insurance claim lawyers to review your policy and fight for what you’re owed. The system may be stacked against you, but you’re not powerless. And as a citizen, make your voice heard—call your state representative and demand action on this scandal. Policyholders deserve better. It’s time to end manipulative insurance practices and hold these companies accountable for prioritizing profits over people.