The Florida home insurance startup company People's Trust, which sells products from a call center, has signed a consent order to pay $155,000 in penalties and to stop writing policies until it meets certain regulatory criteria, it was announced today.
Announcement of the settlement by Florida Insurance Commissioner Kevin McCarty appears to end a dispute that saw People's Trust Chief Executive Officer Mike Gold accuse Florida Chief Financial Officer Alex Sink of moving against him because of pressure from an agent group.
Ms. Sink's office said she was only carrying out the law. Following word of the consent order Ms. Sink issued a statement saying, "These violations confirm my concerns about People's Trust MGA's use of unlicensed agents to advise consumers on insurance matters. I am deeply troubled by these violations, and commend Commissioner McCarty for taking action."
Mr. McCarty in announcing the order said he appreciated "the new concept that People's Trust has introduced to the sale of property insurance in Florida," but the company needed to meet legal standards. Since it began business last year the company has had direct written premiums of $39.4 million.
The commissioner said an Office of Insurance Regulation investigation had found, "among other things, that People's Trust: failed to obtain inspection reports to confirm replacement cost values and/or insurability; failed to obtain proof of protective devices; failed to comply with various practices related to claims submission, investigation and payment; and failed to comply with its approved business plan, by writing more policies than allowed–an issue that could have created exposure beyond the company's claims-paying ability."
Mr. Gold said previously that he had been inspected by OIR and by Ms. Sink's office after previously gaining consent for the way he planned to operate beginning last fall, and investigators had initially indicated there was no problem.
He said his later problems developed after complaint against him was filed by the Florida Association of Insurance Agents, which objected to his use of call center staff, who initially were not licensed as insurance agents. In March, when CFO Sink announced she was suspending the People's Trust license FAIA announced its "appreciation" of her action.
Besides penalties and costs, the consent order requires the company to deposit $500,000 with the Bureau of Collateral Management.
It requires People's Trust to use licensed agents and customer service representatives to do business, provide proof of adequate reinsurance.
The company also agreed to add "persons with significant insurance industry experience" as president, vice president, chief financial officer and underwriting manager, "or similarly title positions."
Under another provision, it must provide proof it has reinsurance "to a probable maximum loss level of at least a 1-in-100 year event."
The consent order noted that the company said it had direct premium written of $17,658,000 for 2008, but its annual statement listed an amount that was $4,992,683 higher. The company said its direct premium for 2009 would be $21,812,000. OIR's order formally limits the company to write no more than $27,933,000 in direct premium for next year.
OIR said its investigation of People's Trust began in December, and an onsite examination was conducted from Feb. 1 through Feb. 20.
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