Insurer that donated to Rick Scott wants up to 25% rate hike in South Florida

April 29--One stunned advocate uses the word "skyrocket."

A four-year-old company that contributed to Gov. Rick Scott's committee and became one of the state's five biggest property insurers wants to raise rates in Palm Beach County, and much of South Florida, up to 25 percent.

Heritage Property & Casualty Insurance Co. has never had a hair ruffled from a Florida hurricane. Yet the company whose growth has come mostly from taking customers of state-run insurer Citizens Property Insurance Corp. seeks a 14.9 percent average increase statewide.

Heritage officials have joined an industry chorus expressing concern about rising costs for non-storm claims such as plumbing leaks. Company officials said they did not want to talk about records reviewed by The Palm Beach Post that show the company's reported claim losses through 2015 have been falling, not rising, as a share of premiums.

"We have no comment," CEO Bruce Lucas said Thursday at an industry conference in Tampa.

Others have trouble seeing why this makes sense.

"There is simply no justifiable basis for the rate increases except for increasing profits for this new and untested insurance company," said Nicole Vinson, a Tampa lawyer who represents insurance customers and heads a group called Policyholders of Florida.

A Palm Beach County coastal customer would see an annual premium increase of 25 percent from an average of $5,289 to $6,612, according to documents requested from regulators. Others in the county would see a 22.4 percent jump from an average of $1,636 to $2,002.

Requested 25 percent hikes also target Martin and St. Lucie counties, records show. In Broward County, proposed hikes range from 19.5 percent to 25 percent. In Miami-Dade County, increases range from 9.6 percent to 22.2 percent.

In four years of existence, Clearwater-based Heritage has grown to become one of the state's five largest insurance companies by customer count with more than 266,000 policies. One trade publication has called it the fastest-growing property insurer in the nation.

Its primary engine of growth is not a mystery.

More than 84 percent of its customers have come from state-facilitated transfers of customers, such as Citizens takeout offers. Less than 16 percent have been what the industry calls "voluntary" customers who arrive from the open market.

A key and controversial deal came in 2013.

That's when Heritage won a narrow 3-2 Citizens board vote to award it up to $52 million to take Citizens customers shortly after Heritage contributed $110,000 to Scott's Let's Get to Work committee. Most insurers got no special payments to take customers, and the plan bypassed the normal Citizens committee process. A Scott-appointed Citizens board member made the motion that the deal go forward.

State regulators are not required to hold a hearing on a rate increase under 15 percent -- interestingly, 14. 9 percent falls just short -- but they have the power to call one, a spokeswoman for the Office of Insurance Regulation said.

"The Office is still in the process of reviewing this filing and has not yet made a decision regarding a public hearing," spokeswoman Amy Bogner said.

Regulators expect to decide by early July on rates that would take effect Sept. 1, she said.

Florida's state-paid insurance consumer advocate, Sha'Ron James, said she is reviewing the filing.

"I am concerned about the requested rate increase by Heritage Property & Casualty Insurance Co.," James said. "My office will work with the Office of Insurance Regulation to examine the rate filing to assure that the rate changes are justified."

The reasons for the rate increase may not be easy for ordinary consumers to understand.

The company's loss ratio -- spending on claims compared to net premiums earned -- fell to 37.5 percent in 2015, down from 40.1 percent in 2014 and 40.5 percent the year before , the company's 10-K report shows.

A "combined ratio" -- losses plus company expenses including administrative costs compared to net premiums earned -- also fell to 65 percent in 2015, down from 71.4 percent in 2014 and 72.9 percent in 2013, according to the report.

The majority of Heritage customers came from Citizens, and they may face some unpleasant surprises ahead.

Scott vetoed a bill that passed unanimously last year with consumer protections that could have made it easier to go back to Citizens under certain conditions -- such as a sharp rate increase from a private insurer.

Other factors are also in play. A clearinghouse, or computer system used by agents, makes renewing Citizens customers ineligible for the state-run carrier if a private insurer is offering coverage at the same price or less. Customers not already in Citizens are ruled ineligible for its coverage if a private insurer is offering coverage priced up to 15 percent higher.

Under both the clearinghouse and transfer letters, private insurers have an incentive to make their initial pricing attractive compared to Citizens rate in order to gain new customers. Now Heritage could provide a large-scale test of what happens when a private company raises rates significantly after taking those policies.

Vinson knows what she thinks.

"Reinsurance rates are way down, no hurricanes have come through in a decade, sinkholes coverage is essentially non-existent in the policies and yet they want to skyrocket rates in South Florida, and make significant increases for the rest of Florida," Vinson said. "This is just plain wrong."

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