FPCA Update: Explorer Insurance Requests Withdrawal From Florida Auto Insurance Market; Eliminates Agent Commissions
Sep 8, 2010
Florida Property and Casualty Association Automobile Division Members:
As reported by Florida Underwriter yesterday, September 7, 2010, Explorer Insurance has filed a request with the Florida Office of Insurance Regulation to withdraw from the state’s auto insurance market, citing insurance fraud as the primary reason for its decision. The article is reprinted below.
Headquartered in California, Explorer Insurance currently has 16,576 Florida policies in premium for private passenger automobile liability and 7,773 polices in premium for private passenger automobile physical damage. If the request is approved, non-renewal notices for current policies could be sent on or after November 22, 2010 with an effective date of January 6, 2011 for the first notices.
Agents were notified via e-mail that all related commissions were reduced to zero as of yesterday.
Published September 7, 2010
“Due to our deteriorating results in Florida, we are reducing all commissions to zero percent, effective Sept. 7, 2010. We appreciate your continued understanding and support.”
That e-mail, sent Sept. 3 from Explorer Insurance Co. to its 400-plus Florida authorized agents, put the brakes on the company’s auto insurance business in the Sunshine State.
Headquartered in Santa Clarita, Calif., Explorer has been writing private passenger auto insurance in California since 1992 and in Florida since 2000. The company also has a claims processing office in Lake Mary, which will remain open “for the time being, to service accounts,” said Assistant Vice President of Marketing Aleci Harvey.
It had been paying 15 percent commission on new business and 12 percent on renewal. Ms. Harvey cited auto fraud as the primary driver for her company’s withdrawal. “We have been hit pretty hard by the fraud issues that are rampant in the state,” she said.
In its withdrawal request to the Florida Department of Insurance Regulation (OIR), Explorer reported it had 16,576 policies ($13,054,867) in premium for private passenger automobile liability and 7,773 polices ($3,749,235) in premium for private passenger automobile physical damage. Explorer is authorized in Florida to write both private passenger and commercial auto business, but the commercial lines have not been active.
In accordance with Florida rules regarding timing notifications, the OIR has told Explorer that if its filing is approved, non-renewals may go out on or after Nov. 22. The effective date of the first non-renewals would be Jan. 6, 2011. The filing is currently pending at the OIR, although approval is expected soon.
Ed Langston of Langston Insurance Services in Casselberry, one of the agents who received the notification, said, “I have been in this business 30 years and have never seen this happen. Is this a new trend for insurance companies?”
Although Explorer policies represent only a small portion of his business, Mr. Langston said he will have a problem moving them to other companies because they are “grossly underpriced.” Mr. Langston further offered that Explorer’s underwriting guidelines allowed it to take business other companies might not.
Ms. Harvey, though, countered, “I am not sure that would be an accurate statement. We competed against companies with similar underwriting guidelines like Infinity, Unitrin, Progressive. ‘Mild non-standard’ would be the market base we went after.”
As to moving the business to other providers, Ms. Harvey said, “We are understanding of the fact it is a challenge for agents in the atmosphere that they have to work under.”
Jeffrey W. Grady, president/CEO of the Florida Association of Insurance Agents, said that when his association learned of the withdrawal plans it contacted the company “to no avail. The fact is, their contract with agents permits such adverse developments with no advanced notice, except that it be transmitted in writing. We would advise agents to avoid such onerous contracts by requiring some notification period before amending the contract in such a material way.”
He added, “As you know, the company has notified OIR that it is withdrawing from Florida and will begin non-renewing policies in January. Additionally, they are not writing any new business, so the agents are getting shortchanged on commission income for policies they would renew between now and January. In essence, it’s the company’s unprofessional way to non-renew policies without complying with the state’s notification requirements. You can be assured the regulator knows these facts and we will likely challenge the fact that if policies renew during this time, the company is collecting a rate that is improperly filed, assuming they withhold the agents’ commission.
“Bottom line is, agents should move the business now,” Mr. Grady advised.
Explorer is a member company of ICW Group. Based in San Diego, privately held ICW Group represents a group of multiline property and casualty insurance carriers providing workers’ compensation, earthquake and personal/business auto insurance. Its member companies consist of Explorer, Insurance Company of the West, and Independence Casualty and Surety. In mid-August, ICW Group announced that, “in anticipation of ongoing broad-scale economic challenges and continued soft market conditions in the property and casualty insurance segment,” it was reducing its workforce 13 percent.
This article originally appeared in Florida Underwriter, a sister publication of National Underwriter.