Hurricane season just started and there is a storm a brewing for a new insurance company on the block, Heritage Insurance Company. Heritage, a new and untested company for catastrophe claims, has been taking over Citizens policies in massive numbers.
Research Heritage and you won’t find a list of court decisions like you will with Citizens Insurance Corporation named as a party. Heritage was created just a few years ago and then massively expanded by taking Citizens policies and now, even though the company has not been tested, it ranks fourth largest property insurance company in Florida.
Floridians with Heritage backing their Citizens policies or who now have Heritage renewals will find they have little when it comes to coverage.
Heritage’s website boasts that sometimes it gives you more than the average Citizens policy, but the policies do not offer much indemnity and the response this new company will have when faced with massive numbers of claims will be very telling. Check out Heritage’s own chart here but keep in mind these are just some of the changes.
Two articles very critical of Heritage were published recently.
First, the Sun-Sentential reported that Heritage was "soaking homeowners" and provided financial data that shocked this policyholder advocate. The financial documents reported that Citizens paid $33 million to Heritage and that without calculating stock grants and options, the two top executives of Heritage were paid 20.4 million in salary and bonuses in the two years since Citizens policies have become Heritage policies.
The breakdown provided to the federal regulators showed CEO Bruce Lucas’s 10.4 million dollar cash bonus atop his $750,000.00 base salary. This trumped the 5.2 million Lucas collected in salary and bonuses in 2014. President Richard Widdicombe received 2.2 million last year and 1.8 million in 2014.
How is this insurance company so flush with cash to give out such insanely generous paydays? The reporter said that calls were not be returned by the company but there is evidence that the company submitted rate increases for homeowner policies of 14.9%. Each year, without approval from the Office of Insurance Regulation, a company can raise rates if they do not exceed the 15% rule. The equation for Heritage is simple, take the rejected Citizens policies and take money from Citizens, jack up the premiums every year and give the money to Rick Scott, or the CEO and President of the company so that when a storm hits, there is no money left to pay the claims. If this happens, the company’s losses are taken over by FIGA, the Florida Insurance Guaranty Association, and the insureds are provided even less.
The Mayo report of the massive salaries and bonuses paid out by Heritage was released on May 25, just two days later the Insurance Journal sent off another flare on this same company.
This article explains that Citizens just approved paying Heritage another $52 million to take 60,000 more homeowners policies. The deal is making headlines with this nationwide publication because of the timing and speed of the deal.
- Florida’s Legislature was not given much notice of the take out plan.
- Citizens only approved the plan by a 3-2 vote
- Citizens normally does not pay companies to absorb a policy.
- Heritage contacted insureds before the deal was sealed and agents had automatic emails that explained why to choose Heritage.
- Heritage is being paid to assume claims from 2016 or at least that is the cover story. In reality. Heritage gets to pick the policies it wants so it can select only those who do not have claims!
- The possible political reason? Tom Gallager (former insurance commissioner) was lobbying for the deal to Heritage and Gallagher helped create Citizens. Add to that the $110,000 contributions by heritage to Rick Scott’s PAC. This then leads to the question, did Heritage give the $110,000 in exchange for the support it needed to collect the $52 million from Citizens?
Consider issues and the facts revealed about the gross paydays to top executives of Heritage and you can see reason to have serious worry if any category hurricane hits Florida. For a decade we have been spared, but we live in an region that will be slammed by storms again—it’s not a matter of if, it’s a matter of when.
Floridians do not have to agree to have Heritage as their insurance company. Policyholders get to decide before changing to Heritage, but without these news articles the public would not be informed of the behind the scenes issues.