By Ralph De La Cruz
Florida Center for Investigative Reporting

The Sarasota Herald-Tribune has a gift for Floridians this holiday season: the resurrection of its spring series on the Florida insurance industry. An industry which, as any Florida homeowner knows – at least anecdotally — is more dysfunctional than the Kardashians.

The Herald-Tribune series added data to the anecdotal.

Like getting a good pair of pants on Christmas morning when you’re a kid, it’s not the most fun gift — but it sure is needed.

The paper’s reporters spent more than a year looking at the insurance industry in the state.

They examined more than 70 Florida-only companies that provide three-fourths of the private insurance in the state and found among other things:

  • Only 30 of the companies appeared financially sound.
  • “More than 100,000 homeowners relied on companies barely capable of paying for house fires, let alone hurricanes. These insurers’ reserves come so close to the state’s $4 million minimum requirement that they operate with only a few hundred thousand dollars of their own to pay claims.”
  • “During the 2009 hurricane season, at least 38,000 Florida homes were insured by companies state regulators knew would fail. Homeowners were not told until after hurricane season, when one company was shut down and the other had to sell.”

Scared yet?

Check out a few more excerpts from the series:

“In simplest terms, the average Floridian with a $350,000 house is insured by a company with less than $750 in hand to pay for that home. By contrast, the average carrier had $1,300 in 2003.

“That same year, Allstate and other well-funded insurers had nearly $4,000 banked for the same risk.

“‘It is the Florida Ponzi Scheme,’ said Miami agent Phil Lyons, secretary of the Independent Insurance Agents of South Florida.”

And the companies are making millions, thanks to relaxed state regulation intended to lure insurance companies into the state after the major carriers bailed following the 1995 hurricane season.

Basically, the politicians were played like cheap fiddles. From the Herald-Tribune:

Investors and executives in 2008 moved $1.9 billion in policyholder money out of heavily regulated insurers, where profits are capped and dividends are restricted, to separate companies that are owned by the same people, housed at the same address and sometimes use the same employees.

As soon as the money is moved, it is beyond the reach of homeowners who might need it to rebuild after a disaster.

It is also free to be paid to investors and owners as profit without interference from regulators.

It’s a testament for the need for tighter state regulation — and a national catastrophe fund.

But after repeated unsuccessful efforts, that’s not likely to happen. And here’s the big lump of coal for you kids. If insurance blogs are to be believed, things will only get worse for Florida consumers.

The expectations are that the new legislature and Gov.-elect Rick Scott will change the rules again — to make it easier for insurers to raise rates.

Ebenezer Scrooge would be proud.