*Profits of insurance companies are limited by regulators to about 4.5% — hardly enticing to investors, considering the risk of hurricanes.
However, insurance executives in Florida have used financial workarounds to reward investors and themselves.
While the profits and executive compensation of the insurance company are capped, the profits of affiliate and parent companies are not.
So executives create sister companies that charge the insurance company for basic services, such as claims handling, underwriting, accounting and issuing policies. (Large national insurers typically handle all of those services internally.)*
If only we had organizations dedicated to hunting down companies that violate the spirit of the law.
It always amazes me when people say fraud has been committed using bank accounts but the authorities can’t do anything because they can’t find out where the money went. Wasn’t keeping track of money the whole point of using a computer? We know they broke the law and we have all the records. The next bit is where you do your job and prosecute the criminals.