|Date:||August 30, 2016|
|Source:||Palm Beach Post|
Upset about a big cut in commissions, a group representing agents said it asked Florida’s insurance commissioner to check on the solvency of a firm that took over thousands of policies from state-run Citizens Property Insurance Corp.
American Colonial Insurance Co. of Longwood told agents the insurer is “losing money on their Citizens take-out business due to skyrocketing water claims and Assignment of Benefits, forcing them to seek a rate hike from OIR and cut expenses elsewhere, including underfunding the work of their agents,” according to a statement from the Professional Insurance Agents of Florida. In response, PIA said it asked Florida Insurance Commissioner David Altmaier “to investigate the solvency of American Colonial to ensure that their policyholders’ risks are adequately covered.”
American Colonial officials declined comment. A spokeswoman for the Office of Insurance Regulation said regulators “will be taking this matter under advisement.”
Assignment of benefits means consumers sign over control of a claim to a contractor or other third party in a situation such as clean-up and repair from a plumbing leak. Insurance companies say that has been a big problem that is driving up the cost of claims, particularly in South Florida. Still, such assertions have not always persuaded regulators in every case: two of the state’s five largest insurers have withdrawn proposed 2017 rate increases.
American Colonial assumed about 6,160 Citizens policies in 2014 and 2015, according to Citizens records.
That’s not how many customers the company seems to have now. It reported 4,489 customers statewide and 305 in Palm Beach County as of the first quarter of 2016, according to a state database.
The agents had a beef with what they said was a 60 percent slash in commissions, or fees paid to agents, on new business and renewals. They let Citizens and state regulators know about it.
“Citizens CEO Barry Gilway took immediate action on behalf of Florida’s agents and notified American Colonial that reducing their agent commissions below that of Citizens would be a violation of their assumption agreement,” according to the agent group in a statement issued late Friday. “Accordingly, American Colonial is in the process of issuing a revised notice that they will only be cutting agent commissions by 33 percent, as opposed to the initially indicated 60 percent, putting them just above the Citizens-mandated rate.”
The agent organization continued: “While this represents a marked improvement for agents, it falls well short of the solution that both policyholders and agents alike need in this scenario. For Citizens depopulation to be successful there has to be trust between the take-out carrier, Citizens, the agent, and the policyholder. To preserve that trust, both agents and policyholders must have faith that they will be treated fairly by the take-out carrier.”