Shopping for property insurance in Florida continues to be risky business. Gov. Rick Scott and legislative leaders warn that the state-run Citizens Property Insurance Corp. won't be able to pay claims after a once-in-a-century hurricane without large post-storm assessments. Yet unproven private insurers that have taken over hundreds of thousands of Citizens policies have failed. And last week, the state's largest private property insurer was fined more than $1 million for mistreating its policyholders. No wonder Citizens customers are wary of the private insurance market.
For years state regulators have known that Fort Lauderdale-based Universal Property & Casualty mistreated its policyholders even as it experienced explosive growth. Among the litany of misdeeds found by the Office of Insurance Regulation was that Universal, like Lucy holding the football for Charlie Brown before yanking it away at the last moment, canceled policies right when a policyholder had a claim. "Post-claim underwriting" was a routine practice at Universal, the OIR found. When a policyholder filed a claim, Universal would search the initial application for insurance for mistakes or misstatements. If anything was found, Universal would deny the claim and cancel the insurance coverage. This left the homeowner with no insurance and major repair bills. Universal also would throw up hurdles to homeowners with claims by requiring them to produce multiple "notarized proof of loss" documents, according to OIR.
The company's business practices suggest that it purposely took losses to justify rate increases. The OIR investigation found that the company paid high fees to affiliated companies and shouldered a disproportionate share of the costs for those companies. For instance, a 2009 tax return that lists 29 companies with the same home address as Universal shows that Universal employed 14 percent of the total workforce but paid for 72 percent of the rental space.
An order by OIR released last week imposed a $1.26 million fine on the company, one of the largest ever levied against a Florida property insurer. But for a company that has more than 500,000 policyholders and $765 million in written annual premiums, a fine this size will have minimal impact. Meanwhile the investigation shows that many of the violations were repeat offenses. It had engaged in some of the same wrongful conduct when last investigated in 2005.
State regulators should look at their own practices: Why was a company with a history of misdeeds allowed to operate and grow so fast for eight years? But there should also be more severe sanctions and lawsuits. Universal's former president and CEO, Bradley Meier, who resigned earlier this year but who is still a paid adviser, deserves more scrutiny. Meier cashed out $5 million in stock, and as CEO he had been one of the highest paid in the state. He got paid well for selling insurance to unsuspecting consumers who had it yanked back just when they needed it most.