It has been eight months since Hurricane Katrina changed the lives of many independent agents along the Gulf coast of three states, and if insurers think they should get a stellar grade from producers in terms of post-storm support, they will be profoundly disappointed.

Admittedly, say state association representatives, the industry was simply overwhelmed by Katrina and other hurricanes during the 2005 season.

However, as agents recover, they are faced with the enormous challenge of finding markets for the limited amount of business available. Insurers are pulling back, association executives contend, by heavily restricting business–and, with those few insurers willing to write, pricing the new business at costs that make it almost prohibitive for the average policyholder.

“Agents are struggling a lot,” said Jodi Bordreau, executive vice president for the Professional Insurance Agents of Louisiana. “It is getting really bad.”

“It's a long, hard, slow, uncertain process,” added Jeff Albright, chief executive officer of the Independent Insurance and Brokers of Louisiana. “It is clear there will be some significant reduction in business [for producers].”

Surprisingly, he noted, few agencies have gone out of business as a result of Katrina's damages–only a “modest number” of less than 10, “that I know about.”

“Our agents suffered monetarily and emotionally and have been traumatized,” he said, noting that producers suffered along with their policyholders–losing homes and enduring the stress of a catastrophe.

“Most have battled back to this point,” he said. “They found new accommodations and have gotten back to something approaching normal. They've gone back to business–but finding markets is their biggest problem.”

“All their clients are gone,” said Ann Sturdivant, executive director of the Professional Insurance Agents of Mississippi. “Some agents have begun to rebuild, but they have suffered losses in commission and income. Clients are scattered all over [the country]. Homes are gone, so there is no need for insurance.”

“Things are changing all the time,” observed Richard Davis, president of the Independent Insurance Agents of Mississippi and owner of the Terral Insurance Agency in Quitman, Miss.

Some companies are pulling out of that region of the state and have stopped writing new business, he said, while others are operating as usual. “It's hard to say what they are doing,” he confessed.

Helping to keep a lid on policy expirations is an emergency rule issued in both Louisiana and Mississippi that continues current coverage until a home is repaired or rebuilt. However, association executives say there is no market for new property business, outside of the state's residual market or even Lloyd's syndicates.

Alabama, which did not suffer extensive damage, did see a significant loss on one of its barrier islands–Dauphin Island–where a tremendous amount of residential property was washed away, noted Victor McCarley, executive vice president of the Independent Insurance Agents of Alabama. Bayou La Batre, home of a large shrimp fleet, is still trying to put itself back together and get back on its feet, he added.

“Overall, folks in Mississippi and Louisiana will tell you the same thing–companies were just overwhelmed,” said Mr. McCarley. “No one ever thought there would be as wide a swath of damage as there was.”

Part of the problem, the associations point out, is that few insurers have in-house adjusters, farming out the work to independents. A shortage of personnel led to delays of as long as 10-to-12 weeks for adjusters to get to a claim, said Mr. McCarley.

Katrina also caused other stresses in agency-carrier relations, associations say.

“The agent-broker relationship with carriers was seriously strained by this catastrophe,” said Mr. Albright in Louisiana. “Claims response was not satisfactory. We sell a promise that the company will be there to handle the claim. That proved difficult and disappointing.”

He said companies “by and far” did not respond magnanimously in helping agents, noting that only a few were there for them. It was also apparent that many insurers had no plans in place for helping out. In some cases the extent of assistance was a token offering, such as a $50 gift card to a local retail store.

That is not to say there was no support from carriers. Some sent in personnel to help or contributed generously to funds set up to bolster agencies. Agent associations also sent in personnel to help. A warehouse was set up in Mississippi for agents affected by the storm to go to for office supplies, since all the office supply stores were destroyed.

Ms. Bordreau said companies also helped agents by not insisting on repayment of commissions on canceled polices. “For some agencies, this would have been a huge hit if they had to return it,” she noted.

However, Ms. Sturdivant in Mississippi said companies are insisting upon return of unearned commissions on most basic policies. The exception is surplus lines, which is considered fully earned premium.

From Louisiana, Mr. Albright's biggest complaint about carriers centered around the withdrawal of business, noting that despite massive catastrophe losses, the industry still posted a substantially higher profit last year (up 12 percent to $43.5 billion, according to preliminary industrywide results).

“It seems to us incongruous that a company should have such a severe market reaction when [the industry is] announcing record profits,” he said.

“I'm concerned companies are losing their appetite for risk,” he continued. “They have to take a measured approach to stay in the market–not jump in and out.”

Meanwhile, pricing has skyrocketed, forcing producers and policyholders to turn to other markets, including Lloyd's, for placements in Alabama–although that doesn't mean the alternatives come cheap. Mr. McCarley told of one case where a homeowner received coverage through the Lloyd's market and saw her property premium jump from $3,000 to $10,000.

With another hurricane season looming, he noted, pricing will not improve soon. “It will get worse before it gets better. It all depends on what happens in the next six months. We have to hold our breath and hope there is not another Katrina. If there isn't, that will go a long way to easing restrictions. It is all about time.”

Generating enough business is an added encumbrance on agent recovery. Mr. Albright said agents in and around New Orleans expect to see reductions in their books of between 25- and 30 percent. Prospecting will be difficult, he added, as public officials expect the city's population to remain half of what it was for the next five-to-10 years.

“By any measure, there will be fewer homes and businesses and other entities to insure,” he noted. “That will have a bigger long-term impact than we can know at this point.”

Another agent concern is errors and omissions claims over lack of coverage. Critics claim agents did not advise area clients that it would be wise to secure federal flood insurance. At first, it was estimated that less than half–perhaps as few as 40 percent–of homeowners had flood coverage when Katrina destroyed the city's levees. However, Mr. Albright pointed out, more recent calculations show the figure to be much higher–about 64 percent.

“We've found that [agents] did a lot better than we thought they did,” he said.

Claimants have one year from the date of the incident to file a claim, and the fear is there will be a sudden onslaught of suits as the anniversary approaches this summer.

Some credit the lack of litigation to the mediation process set up in both Louisiana and Mississippi, which has settled the bulk of disputed claims to this point. “Agents are dealing with the tough claims now,” noted Ms. Bordreau.

Many of the calls the association is now receiving are from customers who were with direct writers that are no longer writing new policies and who are looking for markets and independent agents to help them. “Either they can't locate an agent or there is no market for them,” she noted. “They want to stay out of Citizens”–the state's residual market–”or had a bad claims experience and want to move elsewhere, but right now there are not a lot of options out there.”

One reform suggested by Mr. Davis would be the creation of a master policy form that includes all types of risk. A policyholder could simply check off what coverage he or she wants. Any risk an insurer would not be willing to accept would be farmed out to another carrier willing to underwrite that risk.

The advantage to such a policy form, he said, is that it would require only one claims adjuster to examine a loss, instead of calling in different adjusters for individual policies.

What new business there is, at least in Mississippi, is being generated by the area's cleanup and reconstruction, with sales booming for general liability and workers' compensation to cover contractors. There also are a lot of new cars to be insured, the associations say.

“There is a boom for the economy that has generated income [from claims settlements],” said Mr. Davis. “There is a lot of money out there now. People are trying to put their lives back together.”

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Gulf Agents Give Insurers Poor Grades

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