New legislation in Florida may mandate the state’s insurers to present the books of affiliated management companies for audits. This legislation would close a loophole left over from the last time the state’s insurance laws were amended, a loophole that kept this information private. Insurers also exploited the loophole to spend the money collected through premiums on ventures that they owned. Such spending was not regulated in any way by the state.
The legislation is an amendment added to a much larger insurance bill, sponsored by Senator Garrett Richter of Naples. Richter opposed the amendment, arguing that state regulators would not be able to keep up with rate at which companies are spending their money. He insists that the Office of Insurance Regulation already reviews the relationship between insurers and the management firms they own.
These management firms are not susceptible to government audit, however, and the dealings that these companies have with one another are largely shielded from prying eyes. There are concerns that this secrecy allows insurance companies to mask their profits with claims of losses, thereby driving up coverage rates.
The amendments author, Senator Rhonda Storms of Valrico, says that it is an unfortunate necessity in a time when an increasing amount of insurance companies are being accused of fraud. The overarching legislation is one that many insurers support, but this amendment may inspire a withdrawal of support.
The legislation is scheduled for continued debate. A decision will be made later this year.