The problems with Florida's homeowners insurance market can be traced to affiliate payments, according to an independent ratings firm that has issued a
During 2023, the most recent year with available data, Florida-based insurers transferred $2.1 billion to affiliates, including $335 million in dividends for investors. Affiliates are outside companies that bring more business to insurers through web traffic and promotions.
On average in the U.S., insurers pay about 5% of their expenses to affiliates, according to Martin D. Weiss, founder of Weiss Ratings. In Florida, insurers paid about 20% of expenses to affiliates. Weiss said this is more costly than keeping the functions in-house. The result, added Nicole Brown, communications director at Weiss Ratings, is "when they're shifting that money outside the company, it's no longer there to help strengthen the company."
Paying more to affiliates also means insurers have less funds available to pay claims, according to Weiss. "The money they're moving is going from their surplus and reserves, money that's supposed to be sitting there to help pay claims," he said. "It's moving into the pockets of investors via dividends and into the bank accounts of their affiliates."
In turn, Florida has had a greater percentage of claims being settled with no payment, he added. In 2023, six insurers closed 40% to 50% of their claims with no payment. In 2024, that has increased, Weiss added, with 23 insurers closing at least 40% of their claims with no payment. Of those, 14 insurers closed more than 50% of claims with no payment, and some closed 70% or more of their claims with no payment.
"Among those 14 companies, we've seen a sharp increase in the percentage from 2023 data to 2024 data. Those 14 companies have had a poor track record in how they treat their policyholders, worse than the very worst of the six companies we cataloged one year earlier," Weiss said. "It indicates to us that this is a bad trend, it's getting worse, and it cannot be explained by frivolous claims or claims that were not covered by the policy. Some of it can be explained that way, but definitely not all."
Increases in unpaid claims drove a spike in lawsuits in Florida, Weiss explained. "In states where insurance companies are doing a good job, or where they're less prone to disasters, the lawsuits against the insurers are minimal, sometimes less than 1% of the number of people whose claims are closed without payment," he said. "In Florida, it's been, on average, 15 to 20 times more than that."
Michael Yaworsky, Florida's insurance commissioner, addressing the property & casualty insurance committee of the National Association of Insurance Commissioners (NAIC) at its spring meeting on March 26, observed that litigation has decreased since a tort reform law took effect in December 2023.
"We educate about the fact that litigation is going to be necessary in cases, but when you do litigate, the party that is ultimately paying under our new framework is the consumer, through some sort of contingency fee arrangement," Yaworsky said.
