As Florida’s insurance market darkens, companies use ‘trade secret’ to keep data hidden

As profitability of Florida property insurers declines, companies are increasingly blocking information they’d rather competitors -- and the public -- not see.

State insurance laws allow companies to designate as “trade secret” any information they assert could put them at a competitive disadvantage if disclosed. The onus then falls on a member of the public to challenge whether that designation is allowed under state law -- a potentially expensive prospect that could require lawyers and court hearings.

Most recently, insurers have been blocking the public from learning how many policies they have statewide and in individual counties, how much they pay out in claims, and how they plan to correct allegations by state insurance regulators of illegal activity.

“Some things are clearly trade secret and shouldn’t be disclosed,” said Paul Handerhan, president of the Fort Lauderdale-based Federal Association for Insurance Reform, a consumer-focused watchdog group. Legitimate secrets, he said, include competitive strategies and plans and data about policyholders’ specific insurance claims. “But it seems that the umbrella has become broad and encompassing things that shouldn’t be trade secret.”

State law allows ‘trade secret’ stamp

Last month, state insurance regulators found that Coral Gables-based Weston Insurance Co. broke state insurance laws by loaning $12.4 million to an affiliate company. The loan amounts exceeded 10 percent of its assets and 50 percent of its surplus -- limits set to ensure companies have enough available cash to pay out claims.

The Office of Insurance Regulation, in a publicly available consent order, admonished Weston and required the company to submit a corrective plan by June 1. But Weston designated its entire corrective plan as a “trade secret,” preventing anyone outside of Weston and the Office of Insurance Regulation from knowing how the company plans to come back into compliance with the law.

Alexis Bakofsky, director of communications for the Office of Insurance Regulation, said regulators are obligated to protect documents that companies mark as trade secret and “they must certify under oath to the truth concerning all documents or information claimed to be trade secret.”

Under state law, if anyone formally challenges a company’s trade secret designation, the company has 30 days to file a defense of its designation in circuit court. A company’s failure to defend the designation within 30 days will give the challenger a default victory and remove the trade secret protection.

Companies follow State Farm’s lead

The trade secret designation has been used by 26 companies to stop releasing market share data that consumers were once able to use to compare companies’ size relative to their competitors. The decisions coincide with a severe decline in profitability of Florida’s insurance industry over the past three years since Hurricane Irma struck the state, causing $17.4 million in insured losses so far.

For more than two decades, consumers, agents and anyone else with an interest in Florida’s property insurance industry could access the state’s QUASR database and learn key data about a company’s market position in comparison to other companies.

Consumers could use the database to find out for each company, county by county totals for new policies written each quarter, how many policies were cancelled or not renewed, which geographic areas companies preferred to concentrate its business, and whether companies were cancelling policies because of hurricane risk. The database also ranked companies by total number of policies, providing a snapshot of where each stands financially compared to competitors.

In 2013, consumers could produce statewide reports comparing 180 companies. By the fourth quarter of 2019, that number had fallen to 154. An information page with a link to the database includes a list of all 26 companies that declined to make their data public. Among them are companies with large market shares in Florida, including State Farm, Florida Peninsula, Tower Hill, Florida Peninsula, FedNat, Security First and People’s Trust.

Twenty-two of the 26 missing companies invoked the trade secret designation in 2019. They followed in the footsteps of State Farm, which in 2014 challenged the Office of Insurance Regulation’s requirements that companies submit their data for public view. After State Farm refused that year to make its data public, the office went to court to try to force State Farm to comply.

But the office lost its challenge in 2017 after an appellate court agreed that public release of State Farm’s data could benefit competitors and erode State Farm’s competitive advantage.

Loss of the 26 companies skews what can be learned from the data still being reported by the other 154, Handerhan said.

Companies also commonly invoke trade secret designations to keep private data about how much they spend paying claims, Handerhan said, which is information that could also be useful to consumers.

The 25 companies that followed State Farm’s lead by hiding market share data likely did it just because the court said they could, and not necessarily because its availability left them at a disadvantage, Handerhan said.

Of several companies contacted to ask why they no longer allow the public to see their data, none responded.

“Some insurers told us, ‘We don’t think it’s right what State Farm is doing.' But after they won, then it became, ‘If they’re not going to disclose it for competitive advantage, why should we?‘” Handerhan said.

Not all companies so secretive

The state’s largest company, Fort Lauderdale-based Universal Property & Casualty, still releases its data.

In an email, spokesman Travis Miller said the company is accustomed to providing “significant amounts of data in public sources” and “believes these types of disclosures are beneficial to regulators and the public and can be provided at certain aggregate levels without jeopardizing proprietary business plans.”

Because of the State Farm ruling, the Office of Insurance Regulation’s only remaining option to compel disclosure of the market share data hidden by the 26 companies would be to seek changes in state law. So far, the office has not indicated any intention to seek such a change.

Mark Friedlander, Florida representative of the industry-sponsored Insurance Information Institute, said he doesn’t understand why market share data should be considered a trade secret since that information is typically shared with insurance trade publications and the National Association of Insurance Commissioners, which publishes it on the institute’s website.

But other data that would be valuable to competitors, such as “sensitive financial data” and other information about how companies do business, is appropriately protected as trade secret. He believes Weston’s corrective plan falls into this category, even if it stemmed from accusations that the company broke the law.

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