Auto Agents To Sue On Commission Cuts
Fed-up with insurance companies cutting producer commissions, an auto agent association is getting ready to sue unnamed carriers that have dramatically cut their compensation.
The National Auto Agents Alliance announced last week that it plans to fight reductions in agent commissions with a lawsuit against still-to-be-selected companies.
NAAA President James W. Holthaus told the National Underwriter that the action was being taken after a recent meeting of the group's board of directors in Clearwater, Fla.
The Denver-based organization is looking to file a multi-million-dollar class-action lawsuit against insurers that have reduced the agent commission on auto policies without passing on those savings to the consumers, NAAA said in a press release.
The commission cuts come with no savings to the consumer or help to the agent to cut overhead, Mr. Holthaus asserted. He said the suit would seek to have commissions reinstated to their original level or see the savings from the commission cuts passed on to consumers.
In the past six months, the frequency of commission cuts by some companies has increased dramatically, to a point where an agent receives anywhere from 5-to-zero percent commission, according to Mr. Holthaus. Most of these cuts are coming on renewal business, but there are cases where members are seeing cuts on new policies as well, he said.
Mr. Holthaus identified Florida, Georgia and New York as three states where this has been happening with greater frequency, but he said these are not necessarily the states where a suit would be filed.
Agents have more control over where to place business on new accounts, so agents can choose to direct business away from those companies cutting commissions, Mr. Holthaus explained. However, he added, it is more difficult for the agent to control renewal business because the agent has already placed such accounts.
Over the next 30 days the association will be seeking an attorney to handle the suit, said Mr. Holthaus. At this time NAAA is not identifying the companies that may be named in the suit or the states it could be filed in.
Mr. Holthaus stressed that some companies work closely with agents and are not cutting commissions, and that the suit would be directed only at those insurers reducing commissions. No monetary figure for damages to be sought has been set yet, he said.
NAAA has not been in touch with any other agent association regarding this suit, but would "be open to others joining or discussing" the litigation, said Mr. Holthaus.
The association represents about 2,500 members in 18 states, Mr. Holthaus said, including the major markets of New York, California, Texas and Florida.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 11, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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