Florida Agents Concerned About Homeowners Choice Contract

By | December 7, 2011

Independent agents in Florida are concerned that an appointment contract offered by a Florida homeowners insurer that recently assumed thousands of policies from another company could result in a loss of those clients.

Homeowners Choice Insurance Co., through its wholly-owned subsidiary Homeowners Choice Property and Casualty Insurance Co., recently agreed to assume the business of the now defunct HomeWise Insurance Co.

The deal affects 70,000 policyholders around the state who have until today to accept Homeowners Choice’s offer of coverage or find insurance elsewhere.

However, the appointment contract offered independent agents handling that business have raised a number of concerns, including several provisions that give the Tampa, Florida-based insurer broad latitude to involuntarily wrestle those policies away from those agents.

“What I’m telling people is if you want to call yourself an independent agent, this particular contract challenges that,” said Jeff Grady, president of the Florida Insurance Association of Insurance Agents.

At issue is a limited agreement offered to agents by the Homeowners Choice that the company said needed to be signed early this week. Grady said the timeframe gave agents little time to adequately review the contract and its impact on an agent’s business.

However, he said, there are several provisions in the contract that should cause agents significant concerns.

One would allow Homeowners Choice within 180 days of a policy nonrenewal or after the second renewal of a policy to terminate an agent’s exclusive ownership of the policy. Such a move could potentially allow the insurer to end the agent’s appointment and directly market to the homeowner.

Grady said that change goes to the heart of an independent agent’s business, which is predicated on the agent owning the rights to market a client’s policy to multiple insurers without an insurer’s inteference.

“The value of an agency is its client list and it is up to an agent and their client to decide where to place the policy,” said Grady.

Another provision in the contract that is causing concerns is that by signing the agreement, the agency gives Homeowners Choice the ability to purchase an agent’s book of business at a specified price at any time within one year of the execution of the contract.

On its face, it allows the insurer the sole right to set the price it pays agents to buy up their existing book of business. “They can get to decide on a price and potentially buying up business and save on commission costs,” said Grady.

In all fairness, Grady said he didn’t want to accuse Homeowners Choice of necessarily having underhanded motives when it comes to agents. However, he said, within the context of the contract, it does give the company the upper hand when dealing with agents.

“The company can definitely shed agents they don’t want to do business with,” Grady said.

Homeowners Choice Director of Investor Relations Jay Mauda said the company was committed to working with agents when it comes to the contract. He said the short timeframe for signing the contract was to ensure that agents receive commissions in a timely manner.

However, he said, the contract is necessary to allow the insurer to get its arms around a large agent force, many of whom are not known by the company.

“We have inherited a lot of policies that are handled through many agents,” Mauda said. “And any profitable company is going to review its operations and producers to make sure there are efficiencies.”

Mauda said the company has been talking to individual agents and depending on those discussion is allowing agents to strike provisions in the contract that they find objectionable.

“Any contract has some language where there are questions,” he said. “All agents have to do is call us.”

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