One of the state’s largest insurers wants South Florida customers to tighten their belts and pay up to 25 percent more, even as CEO Bruce Lucas of Heritage Insurance Holdings Inc. has hauled in a $10 million bonus and nearly quadrupled his total compensation to $27 million in one year.
Customers may well struggle to understand why a company that has never experienced a hurricane and whose claim losses have been falling as a share of premiums needs a 14.9 percent average statewide increase when if can afford such generous compensation, said Ken Schurr, a Coral Gables attorney who represents policyholders against insurance companies.
“People are living paycheck to paycheck and this guy is making $27 million,” Schurr said. “It’s not right.”
A Palm Beach County coastal customer would see her annual premium increase 25 percent from an average of $5,289 to $6,612, according to rate records requested by The Palm Beach Post. Others in the county would see a 22.4 percent jolt from an average of $1,636 to $2,002.
The state’s Office of Insurance Regulation is not required to hold a hearing for requested increases under 15 percent, and Heritage’s request falls interestingly short at 14.9 percent statewide. Florida insurance consumer advocate Sha’Ron James asked for a hearing in this case, but a state spokeswoman said Friday that regulators still have not decided whether to hold one.
Heritage, a four-year-old company, contributed to Gov. Rick Scott’s committee and became one of the state’s five biggest property insurers almost overnight, thanks mostly to large-scale transfers of customers from state-run Citizens Property Insurance Corp. Less than 16 percent of its more than 266,000 customers are “voluntary,” meaning they did not arrive from state-facilitated transfers.
Citizens executives said last week they expect to add customers in 2017, reversing a trend of big drops since 2012. That is in spite of Citizens rate increases near 10 percent in South Florida that officials blame on non-storm claims such as plumbing leaks. Why? Because private insurers including Heritage want to raise rates even more.
Despite almost 11 years without a hurricane in Florida, Heritage seeks a sharp rate boost, particularly in South Florida.
Florida homeowners remain the primary source of revenue for the Clearwater-based parent 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 is more than 13 times Lucas’s 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 continue to roll in 2016, when Lucas’s base pay has more than doubled to $2 million, record show.
But the company says it needs customers to pony up more.
“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.