How Florida lets insurance companies like Slide cherry-pick policies

July 24, 2024

CAPE CORAL, Fla. — “This blows my mind,” the podcast host said. Was starting an insurance company in Florida really that simple?

It was February 2022, and Bruce Lucas had joined “The Insurance Guys” to talk about his new tech-insurance start-up, Slide.

But first, the Alabama-based hosts needed him to spell something out: If they too wanted to open up a carrier in the Sunshine State, they “could essentially take over a bundle” of policies from the state and then “those people would essentially get a letter saying, ‘Hey, you are now part of [the new] insurance company’?”

Yes, Lucas said. And then the former corporate attorney laid out how this system has enabled him to become one of the most successful and influential insurance executives in Florida.

“You get to cherry-pick the policies,” Lucas said, describing how he has been able to select hundreds of thousands of favorable policies — and the revenue that comes with them — from Florida’s state-run Citizens Property Insurance Corp. “You are underwriting and cherry-picking the best policies,” he added, “leaving kind of the worst ones there.”

In Florida, this is what’s known as a takeout, in which an insurer is able to assume thousands of policyholders and millions in premiums in one swoop, without fees or acquisition costs. Florida officials created the system about 30 years ago to try to shrink the exposure of Citizens, the state’s insurer of last resort, and attract new carriers after Hurricane Andrew sent major carriers scrambling.

That opportunity is what drew Lucas to the industry in 2012 when he created Heritage Insurance, and what’s behind Slide. He’s far from alone. Dozens of start-ups have flocked to the state over the years lured by the chance to grow big.

But while this system has been working for some top executives like Lucas, it has been crippling many residents and disaster victims, who are paying some of the highest prices in the nation for insurance while experiencing some of the worst claims handling and processing times, according to an investigation by The Washington Post. For many victims of last year’s catastrophic Hurricane Ian, the dysfunction has crushed their livelihoods, with scores still living in unfinished homes.

Over the past two decades, more than half of the carriers that participated in the “takeout” program have gone insolvent, state data shows. As climate-fueled hurricanes have repeatedly hit Florida in recent years, Citizens has picked up hundreds of thousands of new homeowners who otherwise couldn’t get insurance, fanning fears that the state-run insurer, with about half a trillion dollars of financial exposure, could need a U.S. taxpayer bailout.

Florida’s insurance market is one of the worst in the nation for homeowners, according to data from the National Association of Insurance Commissioners (NAIC) obtained by The Post. Overall, in 2022, Florida had the highest percentage of unpaid claims of any state and the most claims that were never processed, and it failed to renew the most policies.

Lucas created Slide in 2021 in response to Florida’s emerging insurance crisis, which began even before Ian. And already, insurance officials have awarded him the opportunity to take over far more policies than any other company, data shows — either directly from Citizens or from other insurers that have gone under or pulled out of the state. A key reason he’s cited for the success of Slide is the state’s recent spate of pro-insurer legislation — changes that he and his lobbyists have been pushing for years.

Lucas and allies say that by raising a significant amount of money, they are able to bring more confidence to Florida’s insurance market. He says it’s especially critical because property insurers in Florida rely on reinsurers — usually global companies — that reimburse them when big disasters hit, and those reinsurers have been raising rates dramatically because of climate change.

“What this market needs is stability and solvency,” Lucas said in an interview with The Post. “It needs companies that have bigger balance sheets, and it needs companies that are buying more reinsurance to keep up with climate change so they can pay hurricane claims. And to make sure that no matter what storm hits your portfolio, you survive.”

Florida officials defend the takeout practice, saying it’s necessary to sustain a private market.

“We wanted them to pick what would be attractive to them so they would keep the policies,” said Michael Peltier, a Citizens spokesman. “It was designed to cherry-pick.”

But critics argue that the system is not working, enriching executives and allowing them to raise premiums dramatically without creating long-term stability. When an insurer fails, as 10 have since 2019, any open claims are sent to another state agency, the Florida Insurance Guaranty Association (FIGA), which haggles over paying for damage, while homeowners often end up back at Citizens for future coverage.

“Slide is in this period where these past insolvent companies were, when they were taking out all these Citizens policies. Either they will be really successful, or they will end up like the other ones,” said Rick Lindsey, an insurance expert and the chief executive of Prime Insurance. “[Florida’s market] is a graveyard; why is this carrier any different if they are following the same playbook? Look at all the other ones.”

Citizens, meanwhile, can’t afford to grow much more. The latest data shows it has 1.26 million policies, slightly off its peak but more than double what it had three years ago. In March, Gov. Ron DeSantis (R) turned heads when he said that “most people know Citizens has not been solvent. If you did have a major hurricane hit with a lot of Citizens property holders, it would not have a lot to pay out.” And in a letter to Florida officials in November, Senate Budget Committee Chairman Sheldon Whitehouse (D-R.I.) requested documents and warned that “if Citizens were unable to cover its losses, it is entirely possible that state leaders might ask the federal government for a bailout.”

Citizens points out that it cannot become insolvent because it would levy an assessment on all Florida policyholders if it needed to raise funds. And Samantha Bequer, communications director for the Office of Insurance Regulation, which oversees the takeout program, said that despite the crisis, the state’s insurance market is getting healthier. “Private companies are not permitted to take on more risk than OIR allows and the review process is extensive,” she said.

For many homeowners, Florida’s system of being bounced from insurer to insurer has created so much financial and emotional stress they just can’t take it anymore. Scott and Bonny Jonas, who moved from Wisconsin in 2015 to retire in Venice, are leaving the state altogether after going through Ian, and then the insurance disaster that followed.

In February, they found out in a single-page letter that their carrier, UPC, had gone insolvent. The now-defunct company had sent them a check for just $2,000 for their storm damage from Hurricane Ian — a tiny fraction of the $145,000 they estimated it would take to fix their house — and then never responded to another call or email. The next month, they got another letter informing them that a new insurance company named Slide had scooped them up.

It was unsettling, but Scott said he was cautiously optimistic. That is, until it came time to renew their policy, and their annual premium jumped from $1,350 to $6,000 for nearly the exact same policy, according to documents viewed by The Post.

Former UPS and FedEx workers on fixed incomes, that would make things tight. But because they still had an open Hurricane Ian claim, no other carrier would touch them. They “were stuck in Slide,” Scott said. They couldn’t go without insurance because they have a mortgage, and they couldn’t sell their house. Shocked, Scott then started asking around and “everyone I talked to with Slide, their rates have gone to four [thousand], five [thousand], 10,000,” he said.

Slide said it is charging an appropriate rate — higher than UPC’s — because that is what the market demands in Florida given the explosion of litigation, fraud and other challenges.

By that point they’d already been through it. The couple had been living in a 10-by-11-foot spare bedroom in their torn-apart home for three months and had already shelled out $63,000 to get repairs going.

“We are prisoners in our own home,” Scott said. “You can’t make any decisions like that; you are locked in, and to me that is wrong.”

Bonny also has debilitating epilepsy, and she said the stress of all this has made her condition worse, the seizures more severe. One morning in November, she had one of the worst seizures that Scott had ever seen in their 33 years together. She walked outside, crumbled onto their lawn and didn’t wake up. Her husband watched her get “hauled away in an ambulance. She almost didn’t come back from that,” he said.

She’s had to twice postpone a major brain surgery because of the stress and condition of her home. That surgery is “the last chance Bonny will have at any kind of life,” Scott said. “One of these days she will take a fall and that will be it.”

The insider

Lucas, who has called himself in news accounts “the ultimate industry insider,” has been at the center of Florida’s tumultuous insurance world for more than a decade. He earned $78 million as chief executive of Heritage over eight years, according to company reports. And in just two years, he’s raised $160 million for Slide, which has catapulted the company to become one of the largest insurers in the state.

Lucas is counting on new Florida legislation to make sure his current business succeeds. The legislation clamps down on lawsuits from homeowners who claim they weren’t paid what they were owed, freeing insurers from covering the legal fees if they lose a case and prohibiting other practices that insurers said inflated their costs.

Critics, though, argue that it will worsen the plight of homeowners.

“Insurance companies love the idea of restricting policyholders’ ability to seek legal remedies. Notwithstanding some abuse of the legal system … legislation went too far without a proper assessment of the situation,” said Gavin Magor, director of research and ratings at Weiss Ratings. “Florida has a terrible record of nonpayment of insurance claims. It is only appropriate that reasonable legal remedies should be available to policyholders.”

Lucas said he is not political and has not participated in any meetings about the new legislation. His main goal outside of work, he said, is spending time with his wife, Shannon, whom he met at Heritage and who is now Slide’s chief risk officer, and their children.

But he has not been shy about supporting the effort and the policymakers who favored it. Since 2018, Lucas and his companies have donated nearly $2.6 million — about $1.17 million in the past year alone — to key Republicans, including those in the Florida legislature who spearheaded the new legislation, according to public campaign finance data.

And on his LinkedIn account, he has written about how he has been “advocating for these reforms for years.” He specifically thanked Florida’s chief financial officer, Jimmy Patronis, for his “leadership” and “commitment” to making these changes happen. He has given Patronis $350,000 in political donations.

In another LinkedIn post, Lucas said that while older carriers will still struggle for the next few years as “their inventory of open claims and lawsuits work their way through the system,” newer companies like his Slide “will feel the positive impacts of the legislation much faster.”

He noted that one of the most attractive parts of one transaction in which he took over nearly 100,000 policies from a failed insurer was that “these policies are newly issued and covered by the new legislation. I would not have done this transaction without these reforms.”

In total, the state has granted Slide the chance to pick up about 650,000 policyholders, nine times as many as the insurer with the next-highest number of policies transferred. (It officially has taken on 175,000 policies so far, more than half from Citizens. Others are forthcoming.)

Devin Galetta, a spokesman for Patronis, said that while Slide was helpful as the market was struggling, the passage of legislation will attract even more companies to the state.

“Slide was one of the few companies taking policies from failed carriers when Florida’s insurance market needed relief,” he said. “Based on the recent legislative reforms, more carriers now have interest in Florida, which is good for policyholders.”

And while Lucas described Slide as an AI-powered juggernaut backed with record-breaking capital that’s going to change the industry, he has said he wants to “take the same approach I did at Heritage” and is using the same playbook to build up.

Both then and now, his first deals were clouded by controversy.

A massive deal

Lucas, who was born in rural Indiana to poor parents with elementary school educations, says he has been working hard since he was 10. Easily bored and a serial entrepreneur, he has jumped from representing Enron in its bankruptcy as a corporate lawyer to the banking industry to starting a hedge fund to, in 2012, seeing a major opportunity in Florida’s chaotic insurance market. He raised $60 million and jumped in, he said.

Then, less than a year later, in May 2013, he cinched one of the biggest takeout deals in state history, taking 60,000 policies from Citizens, which, as it is today, was desperate to shrink. While insurers usually only receive premiums from such policies going forward, Citizens agreed to pay Heritage up to $52 million in retroactive premiums, according to news reports.

The transaction, which received significant media attention, sparked a firestorm, triggering complaints from other insurance executives. Lawmakers also balked, with one writing a letter to the insurance commissioner at the time describing it as a “blatant case of corporate welfare” and demanding an inquiry into how exactly it happened.

“He doubled the value of his company in one transaction. I was one of the guys who ran to Tallahassee,” said a former fellow insurance executive who spoke on the condition of anonymity for fear of retribution. “It was like, I want the same deal as Bruce Lucas, and they were like, ‘No. We won’t do that again.’”

Lucas’s lobbyists had met with then-Gov. Rick Scott’s (R) administration about two months before the takeout went public, according to the Associated Press. News reports highlighted that Heritage had recently donated to Scott’s campaign and that the Citizens board member who tipped the 3-2 vote in favor of the transaction was a Scott appointee.

Lucas has brushed off accusations that the deal was anything but aboveboard. However, the chief executive of Citizens at the time apologized, acknowledging that it did not follow proper procedures. After that, Citizens stopped offering those deals.

In the podcast “The Insurance Guys,” Lucas described discovering how easy it was to make money after gaining new customers from Citizens.

“You send out these notices and it gets mixed in with everybody’s junk mail in the trash can,” he said. “And next thing you know you’ve got 200,000 customers.”

From 2012 to 2016, Heritage took out nearly 340,000 policies from Citizens, the most of any company. Then Hurricane Irma ravaged Florida in 2017, severely affecting Heritage and other carriers, and those claims started to cost millions more than Heritage had originally planned. The carrier began to offload policies and pull out of risky areas.

“Heritage continues to proudly serve our Florida customers,” said Ernie Garateix, current chief executive of Heritage. “Any rumors that we are leaving the state are categorically false.”

One day in 2020, sitting in his office, Lucas said he decided that he wanted to leave Heritage and build something completely new by jumping into what is known as “insurtech.”

“I thought it was going to be a huge opportunity in Florida because I knew the market was going to collapse. It was obvious,” he said.

‘A necessary evil’

As his old company hit hard times, Lucas launched Slide. And once again, he was accused of getting special treatment from the state.

Slide and Florida insurance officials almost instantaneously brokered a $400 million takeover of an insolvent company — a deal made so quickly that other insurance executives complained that it was signed before they even knew that an opportunity existed.

Knowing they were going insolvent, executives at St. Johns Insurance Company approached Lucas in February 2022 asking him for help, he said. He couldn’t invest in or take on the company’s liability, but he said he could offer policy renewals to its 147,000 customers, while the state’s financial guarantee association, FIGA, would take on its open claims and debt.

“When you combine my reputation as one of the top insurance operators in the U.S. with my experience in the Florida market, and the massive amount of capital that I raised, it’s not difficult to understand why the St. Johns owners contacted me looking for capital to save their company,” Lucas said.

Everything came together fast, industry executives said.

On Feb. 17, St. Johns lost its financial stability rating — often seen in the industry as a death sentence for a carrier. That same day, Lucas incorporated Slide in the state of Florida.

Not even a week later, the detailed transition plan was in place. As part of it, FIGA had to take out a loan to cover the exchange and would quickly send Slide $172 million in cash — money that Florida taxpayers would eventually pay back through an assessment, said FIGA executive director Corey Neal.

While unusual, Neal said it was better to get people onto a private insurer rather than swell Citizens’ exposure further. Still, he acknowledged that the system is not working for policyholders whose claims take months to solve because of the constant shuffle between the state and private market, or for his agency, which has to pick up the pieces and pay the bill.

“It’s a necessary evil,” he said. “A big problem is that so much of this information is confidential. We’ve been trying to have the state involve us in pre-liquidation so we can get more of a heads up and prepare.”

For some policyholders, the transition was rocky.

Like the Jonases, Georgia and Alexander Sekulski did a double take when they got a letter in the mail informing them that their longtime insurance company was defunct and they were now under an insurer they’d never heard of: Slide. The elderly retired couple got it ironed out.

But the real problem was on the home they had just inherited from their uncle, which also was transferred from St. Johns to Slide before it was thrashed in Hurricane Ian.

When they finally opened the front door of his home after the storm sent torrents of wind and rain down on the neighborhood, they gagged from the pungent smell of sewage and mold. The sheet rock looked wet and the carpet below the windows was squishy.

Slide sent out an independent adjuster to inspect their uncle’s house in the second week of October 2022. The carrier eventually denied the claim, saying flooding caused all the damage, which Slide did not cover, according to the denial letter mailed in January. The couple panicked because they had already paid restoration workers about $18,000 to come in. Their son also had to help cut out most of the interior of the house. Like many other victims, the Sekulskis said they could not reach their insurance company. Their public adjuster also said it was impossible, showing The Post his call notes and his client’s file.

“It was very stressful to deal with an insurance company who wasn’t returning calls and you are trying to get in touch with someone and they never call you back and then you get the denial letter,” Georgia said. “It’s a constant stress of how do we find the means to make this house livable? Do we go into our retirement fund? And how much does that cost? We don’t have it.”

By April, they requested a mediation. Finally, in September, nearly a year after Ian, Slide ultimately agreed to a payout of $42,000, up from the company’s original offer in mediation of $15,000 — because it concluded damage was due to wind-driven rain, Slide said.

Although they are relieved, it’s not enough to make the house livable, Georgia Sekulski said. They need new floors, the windows are no longer up to code, and the list goes on. Also high on that list? Finding a new insurance company.

“I have no intentions of staying with Slide. The only reason it stayed that way this year is because we had to,” she said. “You pay your insurance all your life and something like this happens and then all the sudden they don't communicate with you, they just ignore you.”

Lucas told The Post that Slide was exceptional when it came to handling Ian claims, saying the carrier was consistently outperforming the Florida insurance market.

Soaring premiums

About a year later after the St. Johns takeover, Slide got another big scoop: taking over 91,400 policies ($272 million in annual premiums) from another failed insurer, UPC, whose chief executive went on to rebrand the carrier. Again, the state had to cope with the debt left behind and thousands of Hurricane Ian claims.

Then in October, Patronis announced that Slide would be offering renewal rights to 86,000 Farmers policyholders after the national carrier surprisingly announced that it was pulling back from the state. He lambasted the national carrier for being woke, saying that policyholders were getting the better deal by going to Slide.

While Lucas says that his young carrier has only received complaints from less than 1 percent of policyholders, hundreds of consumers and their advocates have been filing them to the National Association of Insurance Commissioners and the state. And, in Facebook and Reddit groups, dozens of people have been asking each other for advice about Slide’s high renewal rates and how to stay with Citizens.

Rob Martin was one of them. Martin and his wife, Amanda, recently moved from Colorado to Florida to be closer to Rob’s mother and became Citizens customers because no one else would insure them. Then in September, they got a letter from their carrier that said, “Great news,” with an offer from Slide. It had an estimated renewal premium of $52,383 — a 500 percent increase from the $8,706 a year they’d already been paying, according to documents reviewed by The Post.

At first, they wondered if it was real. Sure, they knew their house, a 1979 canal-front home on Satellite Beach, a high-risk flood zone, was pricey to cover, but that much?

The policies were “as similar as possible,” Amanda said. What was even more terrifying, though, was that the letter said that Citizens would choose for them if they didn’t respond within a month’s time, her husband added.

“This is an important decision, but it must be made quickly,” the notice reads.

“It’s a shock getting a letter that says you have to make this choice or we will make it for you and by the way it’s a [500] percent increase — it was alarming to say the least,” Rob said.

After doing research, they learned that they could stay with Citizens, and that is what they decided to do. But the Martins are now wondering if it’s worth living in Florida.

When asked about Citizens customers receiving high renewal rates, Slide said that “a small percentage of selected policies contained an error” and that the carrier didn’t take on any of those policyholders. Lucas also pushed back on allegations that his company is offering outrageous prices, saying that his “rates are not out of line for what market expenses are; our rates reflect what it takes to be solvent.”

Citizens, however, said that Slide was the only company sending out renewal offers that high. After an outcry in October, regulators inserted new language into takeover orders to prevent that from happening.

Scott Jonas gets that everything is more expensive now, including insurance. But that’s not what angers him; it’s getting “financially whacked, first by a hurricane, then your insurance company, then by entire system.”

After weeks of silence from FIGA, which has been overrun by claims, the Jonases hired a lawyer to try to get their case moving. Finally, earlier this month, they settled on $113,000, 60 percent of which will go toward their attorney and other fees, leaving them with thousands out of pocket they’ll never get back.

“It’s a scam,” Scott said. “You would be a fool to stay here and go through this again.”

In December, Bonny finally had her big surgery. She’s still in the hospital and already had a small seizure. The past two weeks have been some of the toughest of her life, she said, but she did share her good news: On Jan. 2, they are putting their house up for sale, and they are immensely relieved.

“We have been prisoners in our own home for far too long,” Scott said.

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