Article Courtesy of The Palm Beach Post

By Charles Elmore

Published 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 property carriers.

“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 14.9 percent.

“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 spokesman said.

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 statewide.

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 officer Lucas.

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.

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