Jacksonville-based Fidelity National Property and Casualty Insurance Co., which covers some 12,000 homeowners in the state, is seeking a statewide average 27 percent rate increase.
At a public rate hearing, Fidelity National Vice President John Giorgianni said the insurer needed the rate increase after losing some $17 million last year. “The rate increase for Florida was actuarially justified and required,” he said. “We are hopeful regulators will grant our rate increase so that we may continue to provide Florida residents with homeowners insurance.”
But Steve Alexander, an actuary with the state’s Insurance Consumer Advocate’s office, took exception to the Fidelity National’s request and recommended the insurer be granted a 12 percent increase.
Alexander took aim at Fidelity National’s relationship with its affiliated managing general agent, Fidelity National Insurance Services. According to state documents, Fidelity National paid out some $31 million to the MGA in commissions and other administrative services. According to those same documents, the MGA paid out nearly $26 million in dividends last year.
“What we’ve got is people making agreements with themselves and they’re not even arms length,” said Alexander. “It’s a mechanism for moving money out of the insurance company and shielding it from hurricane risks.”
Alexander said that 36 of the 47 Florida insurers that earn more than $20 million in annual premiums use a similar arrangement with a MGA. He said that MGAs should be paid on a fee basis as oppose to receiving a commission so a MGA doesn’t receive more money for doing the same work just because an insurer received a rate hike.
Giorgianni defended the arrangement, stating it common in the industry. He also attributed the MGA’s dividends to the money it receives for processing claims for the National Flood Insurance Program and not the money it receives for administering the insurer’s homeowners policies.
Topics Florida Pricing Trends Homeowners Insurance Wholesale
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