When The Agent-Insurer Marriage Fails
Like a marriage, the relationship between an agent and company may seem like a good match at the start, but as problems arise, how the partners deal with the issues determines whether a relationship survives.
Some examples dealing with these issues include recent developments in New Jersey and Minnesota.
In the Garden State, the New Jersey State Supreme Court ruled that an agent can not sue a company without going through the insurance commissioners office first. (See NU, July 9, page 9.)
In Minnesota, agents were so upset with their treatment by companies that the Minnesota Independent Insurance Agents in Edina, Minn. considered forming a collective bargaining unit. (See NU, March 12, 2001, page 3 and January 1, page 1.)
There does not appear to be any single overriding issue turning relationships sour, association representatives say. A lot of the treatment has to do with the contract wordings and what the state allows.
In the difficult New Jersey auto insurance market, where two companies have decided to leave the state (see NU, June 25, page 2), a regional carrier selling through independent producers, Newark Insurance Company, was given permission to stop writing new auto insurance business. Representatives from the Professional Insurance Agents of New Jersey and the Independent Insurance Agents of New Jersey said they understand the company is also terminating agents contracts.
The insurance department there has not revealed what permission was given to Newark. A spokesperson for the department said the contents of the letter to Newark remain confidential.
"Agents are not viewed as partners anymore," said Kathleen Weinheimer, vice president of Industry Relations for the Independent Insurance Agents of New York based in Syracuse, N.Y. "I dont want to get across the wrong message, but there is more of a trend by companies not to support agents like they used to 15 years ago."
The relationship is a matter of business, Ms. Weinheimer noted. Companies are going back to the fundamentals of underwriting and are not giving agents advantages they use to enjoy.
Ellen Kiehl, assistant executive director for PIANJ, New York, Connecticut and New Hampshire based in Glenmont, N.Y., said outside of New Jerseys auto problems, there is no sense of an increase in company terminations of agent contracts in the region. "It is more of an individual situation where a company is making adjustments," she said.
Companies terminate contracts because they change underwriting guidelines, or alter sales goals agents find difficult to meet, she said.
"Most companies have tried to work with agents in advance of terminations and the decision is made at that time if it is going to happen," said Jeanne Heisler, president of the Ronan Agency in Bricktown, N.J, and past president of the Independent Insurance Agents of New Jersey.
New Yorks insurance problems lie in the contractor market, Ms. Weinheimer said. Terminations are not the issue, but restrictions placed on contractor coverage are leading to a crisis.
In California, the issue is production. In the mid-1990s companies began terminating agents in rural communities over a lack of volume, said Darlene Penfold, principal at Penfold-Leavitt Insurance Agency, Inc. in Eureka, Calif. and a member of the news media team of Insurance Brokers and Agents of the West in Oakland, Calif. This affected both personal and commercial lines and forced agents to either sell their books or merge, bringing about the near demise of the small agency in the state, she said.
"Companies wanted million dollar premium volumes; you cant do that here," she said, citing her own territory where there is a population of 25,000 in the city and 100,000 in the entire county.
The pendulum, however, now appears to be swinging in the other direction, she noted. Companies are returning to the independent producers because other forms of marketing, such as the Internet and direct sales, have not proven to be moneymakers.
"Companies have taken an unrealistic view of the marketplace in general and specifically in rural areas," Ms. Penfold observed.
In Florida, hurricanes wreak havoc, even when they are not forming off the coast, and local agents are paying a price.
After Hurricane Andrew in 1992, a moratorium was placed on a percentage of property insurance non-renewals in Florida, said Jeffery Grady, president and chief executive officer for the Florida Association of Insurance Agents in Tallahassee, Fla. The moratorium was not extended this year. The result: a massive withdrawal of companies from the state, he said.
The strain is made worse, because many insurers wanted a customers entire book of business in order to write property, he said. The result is a loss of capacity across all lines.
However, agents will continue to overcome obstacles placed in their path, Ms. Penfold said. "I feel the independent agents will survive and thrive," she said. "There is that entrepreneurial spirit that survives everything."
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, July 30, 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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