Unfinished State Report Exposes Insurers accounting tricks to conceal profits

State regulators recently informed lawmakers that a state report revealing insurers losing money while their affiliates made billions “raised red flags,” but was incomplete because it was never finished.

During a three-hour hearing, Florida’s current and former insurance commissioners faced tough questions from both Republicans and Democrats about why the report, left unfinished in 2022, was never submitted to the Legislature.

“I find it outrageous as a legislator that we’re receiving something so outdated and riddled with flaws,” said Rep. Mike Caruso, R-Delray Beach.

Last month, The Times/Herald uncovered the previously unseen state report, which revealed that insurance companies channeled billions of dollars to affiliated companies while claiming to lose money between 2017 and 2019, when the state’s insurance crisis began.

In response, House Speaker Daniel Perez, R-Miami, instructed a House committee to investigate whether insurers were using “accounting tricks” to conceal profits.

The groundbreaking study was commissioned in 2021 by former Insurance Commissioner David Altmaier, following concerns about insurers’ use of affiliate companies.

Insurers establish affiliates to charge the parent company for basic services, like handling claims and writing policies, often at inflated rates — allowing them to make profits beyond what state regulators would typically permit.

The state paid a consultant $150,000 to analyze these relationships, and the consultant delivered the report to the state on April 1, 2022, according to emails.

The findings “definitely raised some red flags,” Altmaier told lawmakers.

“What we indicated was that there’s a lot of smoke, and we need to determine if there’s a fire,” Altmaier said. “That’s what I thought was underway when I left the office,” in December 2022.

However, the investigation was never pursued further. The report remained in draft form, and no follow-up action was taken.

Lawmakers repeatedly questioned why this occurred.

“Why did the investigation stop?” asked Rep. Susan Valdés, R-Tampa. “Who made the decision to say, ‘This isn’t important enough’?”

Altmaier responded, “I don’t believe anyone made that decision.” He continued, “Honestly, when I was asked to come here today, that’s the one question I haven’t been able to answer.”

Altmaier, who began consulting for insurers three months after leaving office, admitted he didn’t recall informing his successor, Insurance Commissioner Mike Yaworsky, about the unfinished report.

“In hindsight, if I could go back, I might have called him and said, ‘Don’t forget to finish that report,’” Altmaier said.

Yaworsky explained that the report might have been overlooked due to understaffing at the office and the overwhelming nature of the insurance crisis at that time. Lawmakers convened twice in emergency legislative sessions in 2022, after the report was produced, to enact reforms making it more difficult to sue insurance companies.

Some lawmakers had raised concerns about the role of affiliate companies in the insurance crisis.

The Times/Herald first requested the report through the state’s public records law in November 2022.

Yaworsky said he wasn’t aware of the report until October 2024, when a lawyer for the Times/Herald demanded its release.

The office initially told the newspaper’s lawyer that the report didn’t exist, but later provided a seven-page executive summary in December of the previous year.