In a recent report to stockholders, insurance giant Progressive used a word that every company would prefer to avoid: Refund.

A statement filed by the company with the U.S. Securities and Exchange Commission warned that premiums collected from its auto insurance policyholders could exceed what’s allowable by Florida law over three years, Insurance Journal first reported earlier in August.

If that turns out to be the case through 2025, the third year, Progressive might have to issue cash refunds or provide credits toward future premiums, the company said.

Refunds on insurance premiums? What a concept. Where can Florida home insurance customers sign up?

It turns out there is a law that would require property insurers to provide refunds if they make excess profits. But those profits would have to come from insurers’ underwriting activities — the nitty gritty of evaluating and pricing risk.

And experts say the state’s top insurers generate the majority of their profits from investments and spin-off companies that perform the bulk of their functions, like communicating with policyholders, providing reinsurance coverage, offering finance terms and repairing damage — activities that aren’t subject to any refund law.

Florida homeowners would likely settle for a notable reduction in insurance premiums after years of increases. In South Florida, it’s not uncommon for homeowners to be paying $7,000 and more for coverage. If they have a mortgage loan, they have no choice but to remain insured.

But as an industry that urged legislative reforms three years ago celebrates a remarkable return to profitability, there are scant signs — so far — that their customers have been invited to share the bounty.

Insurance insiders urge consumers to wait just a little while longer. Market capitalism will come to the rescue, they say. Competition from 15 new companies — and counting — formed as a result of the reforms will drive prices down, they say.

Insurers are profitable again

Reforms enacted by the Legislature in 2022 and 2023 were meant to reduce litigation rates that had grown out of control, forcing insurers to raise premiums in Florida far faster than any other state over the past decade.

Reinsurers, the deep pocketed funds that sell insurance to the insurers, were increasing their rates. As the 2022 hurricane season approached, industry leaders questioned whether some insurers might not be able to obtain enough reinsurance to satisfy the state’s insurance regulators.

Industry leaders now say the reforms are working.

During the first half of 2025, the number of lawsuits filed against insurers of all types decreased by 29% compared to the first half of 2022.

Florida’s domestic insurers reported a combined net profit of $944 million in 2024, Insurance Commissioner Mike Yaworsky reported in June. That’s up from $292 million in 2023. In 2022, the industry posted a $741 million net loss.

Enough money is coming in that 29 companies filed to reduce rates and 44 requested no change since January 2024, Yaworsky says.

In its review of Florida industry trends in 2024, global reinsurance broker Gallagher Re reported policyholder surplus — the amount of money insurers have to cover their obligations — increased from $7 billion in 2023 to $13.1 billion among companies operating in the state last year.

Ordered to cut rates

Florida underwent a similar insurance cost crisis in the aftermath of 2004 and 2005, when eight hurricanes struck the state. Back then, homeowner premiums averaged less than $1,600.

In 2007, newly elected Gov. Charlie Crist called the Legislature into a special session to enact reforms to reduce costs, including many that insurers disliked and would later lobby to repeal.

One of the reforms, which remains on the books, requires property insurers to refund excess profit. But the law sets a nearly insurmountable bar before the refund requirement is triggered: the insurer must post sustained underwriting profits over a 10-year period.

Lobbyists and industry-friendly legislators made sure to narrow refund possibilities only to profit generated by underwriting activities, shielding investment income and profit that insurers earn from their other functions, says Steve Geller, a plaintiff attorney and Democrat who represented parts of South Florida in the state Senate when the law was enacted in 2007.

“The insurance industry only agreed to [the excess profit provision] because they knew that they would never have to pay anything out under it,” Geller said. “They shoot for a 0% underwriting gain and make their money on investment income.”

Asked whether excess profit could be found under the language of the 2007 law, Security First Insurance chairman and CEO Locke Burt responded, “Everything is possible. But it’s a high bar.”

Universal Property and Casualty, one of the state’s largest homeowner insurers, is an example of how companies can report underwriting losses while still turning a profit.

The company’s 2024 annual report shows it earned a net profit of $58.9 million last year, down from $66.8 million in 2023 but up from a $22.3 million net loss in 2022.

Yet Universal’s report also indicated that the company lost money performing its core insurance function while generating its profit from investment and service operations. Meanwhile, the average statewide premium that the company charges homeowners increased from $3,270 during the second quarter of 2022 to $4,634 three years later, a 42% increase.

The business model described by Geller generated controversy last spring after the Office of Insurance Regulation released, for the first time, an independently produced report from 2022. It asserted that 52 insurers claimed a collective $432 million net loss from their core operations while 51 of them earned $1.8 billion by funneling premiums through spin-off companies or their holding companies.

Burt, however, says the Office of Insurance Regulation evaluates rate requests and ensures that no company makes more than a profit margin ranging from 4% to 5%, regardless of investments or what functions are spun off.

“Each rate filing is over 2,000 pages long, and it has to be filed under oath,” he said. “And I can tell you, the [Office of Insurance Regulation] looks at them very closely.”

The reviews Burt mentioned look at whether rates are adequate to cover projected profits and losses in the future, says Elliott, the Office Insurance Regulation spokesperson.

A review based on the 2007 statute would look at how companies performed in comparison to their projections.

Elliott said she is unaware that any refunds have been ordered under the 2007 statute.

Meanwhile, CEOs take home millions

That still leaves the question of why some companies can reward its executives with millions of dollars in compensation that far exceed the 4% to 5% allowable profit that Burt says is baked into regulators’ review process.

Bruce Lucas, CEO of Slide Insurance and its holding company, Slide Insurance Holdings, collected $50.3 million in salary, bonuses and company stock for himself and his wife Shannon, who serves as Slide’s chief operating officer, for work in 2023 and 2024, according to a prospectus the company released in June ahead of its initial public stock offering.

The company reported a combined net income of $288.5 million for the two years.

Elliot said the Lucases’ compensation was paid by Slide’s holding company, not the insurer. Florida’s insurance regulators, she said, have no regulatory authority over what holding companies pay their employees “at any level.”

When asked about the compensation in June, Lucas and spokespersons working for Slide said an SEC-ordered “quiet period” barred them from responding. Last week, spokesman Doug Donsky was more direct when asked by email whether any of the $50.3 million should have been refunded to policyholders.

“It is the company’s policy not to discuss compensation or other internal matters,” he said.

Recent financial statements of other publicly traded Florida-based insurers showed high levels of executive compensation, including bonuses and stocks, though none as high as what Slide reported.

Universal’s CEO Stephen Donaghy earned $4.5 million in 2024, equal to about 13% of the company’s net profit last year.

Heritage Property and Casualty CEO Ernie Garateix earned $4.3 million, about 7% of the company’s reported net income of $61.5 million in 2024.

And American Integrity Insurance Group paid its CEO Bob Ritchie $1.9 million in 2024, 4.7% of the $39.6 million of net income reported last year by the company, which went public in May.

Lobbyist call excess profit laws ‘anti-capitalism’

Many states have excess profit laws and Florida has ordered refunds from insurers who overcharged in the past.

In 2024, Florida insurance regulators ordered Liberty Mutual to refund $4.7 million after the state found it overcharged on 46,053 auto insurance policies.

In 2009, Hartford Financial was ordered to return $48.2 million to businesses overcharged for workers compensation coverage between 2004 and 2006.

If Florida insurance regulators applied the same refund requirement to property insurers as it applies to auto insurers, quite a few policyholders might be owed refunds in a few years.

The law states that if an auto insurer reports profit in the three most recent years that is greater than its anticipated underwriting profit plus 5% of earned premiums, it must refund the excess profit.

Achieving its current profit level through the end of the year could require Progressive to refund 6% of the premiums it charged, calculates Birny Birnbaum, director of the Center for Economic Justice and former consumer representative at the National Association of Insurance Commissioners.

Elliott says that Florida insurance regulators are “looking at a process” to review property insurers for excess profits “as the market has improved and insurers are starting to show profits.”

She added, “Keep in mind that the review period for residential is 10 years, so companies would need to show good performance for a sustained period of time.”

Competition from Florida’s newly competitive — and profitable — insurance marketplace will save policyholders so much money that they won’t have to worry about refunds, several insurance insiders said.

Burt, the head of Security First Insurance, predicted that the entry of 15 new property insurers will lead to insurance costs that are as low as they can get. “In a free market that’s relatively easy to enter, competition removes excess profit,” he said.

And Lisa Miller, a former deputy insurance commissioner in Florida who now runs a consulting business, concurred.

“Rates are going to come down, absolutely,” she said. “It’s competition. It’s stable reinsurance rates. The market’s soft. I’m very encouraged.”

But state Rep. Anna Eskamani, a Democrat serving in the Republican-dominated Florida Legislature, said that insurance companies should be required to refund excess profits.

She referred to the 2022 report that stirred up the Legislature earlier this year but didn’t lead to any reforms.

“Any law forbidding an insurance company from earning an excess profit is meaningless if the company can dodge it just by moving money from one corporate pocket to another,” Eskamani, who represents parts of the Orlando region, told the Sun Sentinel. “We can and should put a stop to these financial shell games. All it takes is a governor and more lawmakers willing to prioritize affordable reliable insurance for Floridians over bonuses and payouts for insurance executives and investors.”

Elliott urged homeowners to shop around for a better price.

“It is advisable for consumers to engage in meaningful dialog with their agents annually, at minimum, to discuss their insurance needs and see what options are available to them, for the best price, because their options are increasing,” she said.

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at rhurtibise@sunsentinel.com.