Rate hike ‘greedy’? Insurance CEO paid $27m, 50
times Citizens’ chief
Article Courtesy of The Palm Beach Post
June 30, 2016
A fast-growing but untested insurer wants South
Florida homeowners to tighten their belts and pay up to 25 percent more
— even as Heritage Insurance Holdings Inc. CEO Bruce Lucas has nearly
quadrupled his compensation in one year to a whopping $27.3 million,
records reviewed by The Palm Beach Post show.
That represents more than 50 times what the CEO gets paid at larger,
state-run Citizens Property Insurance Corp., where Heritage got most of
its customers on its way to becoming one of the state’s five largest
“People are living paycheck to paycheck and this guy is making $27
million,” said Ken Schurr, a Coral Gables attorney who represents
policyholders against insurance companies. “It’s not right.”
After all, Heritage has never experienced a hurricane and its claim
losses have been falling, not rising, as a share of premiums, he said.
Yet it wants homeowners to fork over a statewide average rate hike of
“Your loss ratio is going down, you’re paying your executive $27 million
— how do you justify a 15 percent rate increase without just saying
‘we’re being greedy’? ” Schurr said.
Citizens has almost twice the number of customers as Heritage, about
490,000. The state-run company paid CEO Barry Gilway $533,000 in 2015, a
Heritage has grown rapidly to become one of the state’s largest property
insurers mostly by taking customers from Citizens. Transfer offers
automatically switch homeowners unless they take pains to decline. Less
than 16 percent of Heritage’s 266,000 customers are “voluntary,” meaning
they arrived on their own, and not through a state-assisted switch.
Heritage contributed $110,000 to Gov. Rick Scott’s Let’s Get to Work
committee and got a sweetener payment up to $52 million that most other
insurers did not receive to take Citizens customers in 2013, The Post
reported. A divided Citizens board approved by a 3-2 vote a deal that
bypassed the normal Citizens committee process. A Scott-appointed
Citizens board member made the motion for the deal to go forward.
If Heritage has its way, rates will shoot up sharply even though Florida
has not been hit with a hurricane in more than 10 years.
A Palm Beach County coastal customer would see the annual Heritage
Property & Casualty Insurance Co. premium increase 25 percent from an
average of $5,289 to $6,612. Others in the county would see a 22.4
percent increase from an average of $1,636 to $2,002.
The state’s Office of Insurance Regulation must decide on the rate
request by July 5, a spokeswoman said Monday.
Florida insurance consumer advocate Sha’Ron James asked for a hearing in
this case, but as time ticks down, regulators still have not decided
whether to hold one, an OIR spokeswoman said.
Regulators are not required to hold a hearing for requested increases
under 15 percent. Heritage’s request falls just short at 14.9 percent
In South Florida, Citizens seeks rate increases near the maximum 10
percent it is allowed under state law. Officials have largely blamed
non-storm claims such as plumbing leaks.
Despite rising rates, Citizens expects to add customers in 2017,
reversing a years-long trend. Why? Many private insurers seek even
bigger rate hikes or have signaled they expect to shed customers in
South Florida, officials said.
Florida homeowners remain the primary source of revenue for the
Clearwater-based holding company that pays chairman and chief executive
In a single year, his total compensation shot up to $27.3 million in
2015 from $7.1 million in 2014, according to a proxy statement.
That includes $16 million in stock awards and a $10.4 million bonus in
the company’s “annual cash incentive program.” The bonus was more than
13 times Lucas’ base pay of $750,000, records show.
Lucas’s total compensation amounts to more than $100 per each of the
insurer’s Florida customers. The company reported $92.5 million in net
income and $395 million in revenue in 2015.
Attempts to seek comment from Lucas and the company’s investor relations
department were not successful.
“2015 was a record year for Heritage,” Lucas said in a statement in
March. “We grew net income 96 percent and delivered a return on average
equity of 30.2 percent. Results for the year were driven by our
continued market share expansion in the state of Florida.”
The good times have rolled into 2016, when Lucas’s base pay has more
than doubled to $2 million from $750,000, record show.
Now the company says it needs customers to pony up more.
“The rich get richer on the backs of these homeowners,” Schurr said.