May 05, 2016
Tampa Bay Business Journal
Storms were just one of the reasons Heritage Insurance Holdings Inc. saw profit dip in the first quarter of 2016.
Another reason, according to Bruce Lucas, chairman and CEO of the Clearwater-based property and casualty insurance firm, was attorneys — specifically, lawyers who represent homeowners who have previously settled claims, but then hire an attorney and come back seeking an additional settlement.
The company saw an uptick in litigated claims that prompted Heritage to increase its reserves, and that increase — combined with the worst tornado losses in the company’s history — were key factors in the 75 percent drop in profit Heritage (NYSE: HRTG) reported for Q1 2016, compared to the same period a year ago.
The practice — which has impacted other companies in addition to Heritage, according to Lucas — is prompting insurers to seek rate hikes, he said. Heritage has filed for a 14.9 percent rate increase on the policies it picked up that previously were held by Citizens Property Insurance Corp. and will be filing soon for an additional increase on its voluntary policies, those not picked up in the Citizens take-out program.
“The No. 1 thing that drove adverse development was litigated claims, plain and simple,” Lucas said during the call. “These are claims that are either attorney-repped or were in active litigation. We had claims that settled, we paid the policyholder, it was a closed claim and then they come back three to six months later with an attorney and want more money.”
An analyst asked whether there was momentum in the state to address the issue through legislation, and Lucas said there was a measure that failed to win approval.
Policyholders are penalized for the practice, he said.
“Ninety percent of policy holders never report a claim yet their premiums are going to go up,” Lucas said.
Now, he said, it’s up to the newly appointed commissioner of the Florida Office of Insurance Regulation, David Altmaier, to take action.
“They really have two choices to make at the OIR,” Lucas said. “Either they take some pretty firm and aggressive steps to allow companies to change their policy forms to combat assignment of benefits, and especially litigated claims, or they just keep stamping rate increases on innocent consumers.”