Trial lawyers target insurance affiliates as premiums fall in Florida

My homeowner’s renewal premium just dropped by $600. For the same coverage!

While rates in other states are rising, millions of Florida property owners are seeing reductions. Competition is flooding the market. The Office of Insurance Regulation (OIR) just ordered Florida’s high-risk pool (Citizens) to reduce its rates by up to 10%.

Even reinsurance, one of the most significant cost drivers, has been trending down for two years.

But if you listen to trial lawyers, you’d think Florida’s property insurers just discovered a dark, occult ritual for disappearing money. They’ve conjured up another “bogeyman” to spoil our dreams called … “affiliated entities.”

The trial bar acts like having subsidiaries is some shell game to siphon off profits. In contrast, insurers pretend to go belly-up from hurricanes. It’s a terrifying campfire story, told with the kind of feigned sincerity that only someone with a 40% contingency fee can muster.

There’s just one problem: it’s historical fiction.

What they call a recent innovation is older than lightbulbs. The use of affiliated service providers — managing general agents (MGA), claims adjusters and marketing firms owned by the same parent company — isn’t a shadowy trick. It’s a cost-saving business model dating back to the 1800s.

Early on, insurers realized that instead of building massive, bloated bureaucracies in every state, they could use specialized entities to handle the routine work of processing policies and paying claims. This vertical integration became a model of efficiency, promoting competition and allowing smaller players to enter the market. By keeping these functions “in-house” through affiliates, companies can slash overhead, streamline data sharing, and maintain a level of quality control unavailable from third parties.

But trial lawyers don’t want to talk about “synergy” or “cost-reduction.” They prefer words like “contingency fees” and “billable hours.”

Their latest bogeyman

Why the sudden interest in boring corporate tax structures that have existed for over a century? Because cost-saving tort reform took the trial bar’s favorite toys away.

For years, the “Assignment of Benefits” (AOB) racket and “one-way attorney fees” served as an ATM for litigators. When the Florida Governor and lawmakers reformed those laws to stop the man-made litigation crisis, the lawyers couldn’t just admit the party was over; they had to find a new reason to sue.

The “affiliate siphon” myth

It’s simple. Point at the fees an insurance company pays to its sister Managing General Agent and scream “profit-shifting!” It’s classic gaslighting that criminalizes efficiency.

If an insurer pays an outside vendor $100 to adjust a claim, that’s “business as usual.” If they pay an affiliated entity $85 to do a better job, it’s a “conspiracy.”

The regulatory reality check

Managing General Agents exist in every state. In Florida, OIR – the best-funded and most professional insurance regulator in the country – closely manages these affiliate relationships, requiring that every such arrangement and every fee must be disclosed and scrutinized. Every word is subject to amendment and prior approval by OIR.

And, if an insurer were ever to overpay an affiliate, the OIR doesn’t just send a polite sticky note; it can levy stiff penalties and even dismantle the company’s ability to do business.

Who actually benefits?

The so-called “secret” that trial lawyers complain about isn’t a secret at all. It’s a sound business practice that keeps rates down … for policyholders.

Just like tort reform, the homeowner wins. Lower expenses mean stability, and in a functional market, that leads to lower rates.

Sadly, trial lawyers aren’t interested in lower premiums. They’re interested in deep pockets. By attacking the affiliate model, they’re seeking more ways to turn a simple claim into a three-year court battle.

Bottom line?

Homeowners should be wary of trial lawyer scare tactics. The use of affiliated entities is a time-tested, highly regulated, efficient method for processing policies, paying claims and keeping rates low.

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Scott Johnson, AAI, CAE, is an independent consultant and author of five books. He is an expert witness and former regulator who regularly blogs on insurance matters. See his website: www.johnsonstrategiesllc.com.