Carriers Being Selective with Florida’s Citizens Clearinghouse Agency Appointments

By | April 9, 2014

Florida’s state-backed Citizens Property Insurance Corp. says the initial opening of its new web-based clearinghouse designed to make it easier for private insurers to write its policies has been promising, although the number of policies removed by insurers has been modest due to the reluctance of companies to appoint agents.

Citizens launched the clearinghouse at the end of January, making it the latest tool for the insurer to reduce its 940,000-plus policyholders.

As designed, the web-portal offers private insurers the opportunity to review applicants for Citizens coverage and instead offer them a policy in the private market. Applicants who receive an offer of coverage at rates within 15 percent of Citizens are not eligible for Citizens coverage.

Until recently, four insurers were participating in the clearinghouse program including Ark Royal Insurance Co., Cabrillo Coastal General Insurance Co., Florida Peninsula Insurance Co., and United Property & Casualty Insurance Co.

As of March 30, six other insurers had joined the clearinghouse: American Traditions Insurance Co., Modern USA Insurance Co., Federated National Insurance Co., First Community Insurance Co., Heritage Insurance Co., and the Tower Hill Insurance Group.

Citizens officials say they have been focused on the operation of the web-portal and have tried not to create any expectations over the number of policies that might be removed.

Last summer, Citizens signed a $45 million, 10-year contract with Connecticut-based technology firm Bolt Solutions to build and operate the clearinghouse.

“Given what we’ve seen in similar computer-based systems, we wanted to make sure Bolt’s system and participating insurers’ internal systems are working well,” said Citizens spokesperson Michael Peltier. “That is why we have been cautious and so far we are satisfied that things are working as they should.”

So far, the clearinghouse has led to 1,173 Citizens applications being deemed ineligible for Citizens’ coverage, representing $302 million in exposure. Of those, 658 applications have been confirmed as finding coverage with one of the participating insurers.

That number, however, is just a fraction of the number of applicants being submitted by agents. As of March 3, the latest data available, agents have submitted 26,714 requests for coverage, of which fewer than 20 percent received an offer of coverage from one of the four participating insurers.

Peltier said those numbers likely reflect that only four insurers were participating and those insurers are being cautious about the number of applicants to whom they offer coverage. He also pointed out that with the clearinghouse now up and running, other insurers might be expanding their writings.

In addition to the clearinghouse numbers, between January 27 and February 28, there has been an 18 percent decrease in the number of Citizens policies as compared to the year before.

During that time period in 2013, agents submitted over 14,000 applications, out of which just over 6,000 received Citizens coverage. This year, the insurer received 9,000 applications and granted coverage to 5,000.

Much of that drop may be attributable to insurers working to write more policies on the front-end rather than waiting on the clearinghouse. Also State Farm Florida announced it would resume writing some new business.

“We are encouraged and either way it works to our goal of reducing exposure whether because of the clearinghouse or companies writing more policies,” said Peltier.

Agents and agent groups are giving Citizens high marks for the opening of the clearinghouse. However, they note it remains to be seen just how the clearinghouse will affect the market.

“The intent of the legislation was not to create a good computer program, but to keep people out,” said Annette Willis Insurance Agency CEO Larry Willis. “No matter how good the program, it is down to the insurers.”

Agent Management Key for Insurers

If the opening results of the clearinghouse show one thing, it is that participating insurers are focusing as much on agent selection as they are on the policies they may wish to write.

According to Citizens, between 2,200 and 2,600 agents are accessing the clearinghouse on a daily basis, with the average time an agent spends on the site at around 21 minutes. In the first five weeks the clearinghouse was open, those agents submitted over 26,000 policy applications to be considered by the four participating insurers.

Under the clearinghouse, in order to write a policy from the clearinghouse, an insurer must appoint an independent agent or reach a limited service agreement with a captive or exclusive agent.

Insurers, however, are free to create their own “knock-out” rules setting criteria that agents must meet to be appointed.

For example, some agents may not be appointed because they are in a territory or geographic area where the insurer is not writing business or because the agent is submitting applications that do not meet the insurers’ underwriting criteria.

An agent appointment is necessary because by law agents “own” the policies.

So far, only two percent of participating agents have an appointment with all four insurers and nine percent with three insurers. Another 18 percent of agents have appointments with two insurers and 34 percent with one insurer. That leaves 37 percent with no appointments, with 25 percent of applications for coverage submitted by agents with no insurer relationship.

Florida Peninsula has appointed the most agents at 2,906 independents and 222 captives. Even so, it refused to give binding authority to 60 percent or the 4,445 agents looking to submit business with the insurer.

Cabrillo and United both refused to give binding authority to more than 70 percent of agents. Cabrillo did appoint 2,148 independent and 212 captive agents while United appointed 1,933 independent and 423 captive agents.

Ark Royal has taken on the fewest new agents, having blocked 95 percent of agents submitting business to the insurer. In total it has appointed only 390 independent agents leaving 7,583 others to seek coverage elsewhere.

Professional Insurance Agents of Florida CEO Corey Matthews said that it is far too soon to measure the success of the clearinghouse. However, he said, so far insurers are not appointing as many agents as hoped for.

Even so, said Matthews, agents remain optimistic that eventually it will open new markets to them.

“Right now is somewhat an evaluation period,” said Matthews. “We still hope that the clearinghouse will eventually create more opportunities for agents.”

Agents are also looking to improve the process of submitting applications to the clearinghouse. While quotes are being obtained quickly, what it takes to get that quote is more cumbersome than what many are used to.

Willis says it takes up to 20 minutes to fill out an application, which is almost comparable to writing a policy. Then the application has to go to the consumer who must sign-off on the application before it can then be forwarded to the clearinghouse.

“When we have to use it, we don’t want it to be difficult to do so,” said Willis of the submission process.

Peltier said that Citizens expects to start submitting renewals through the clearinghouse later this year. He said the insurer would start sending out non-renewal cancellation notices in July, which will give policyholders between 60 and 90 days to find coverage.

An open question is what will happen when the hurricane season begins. Will insurers still remove policies from the clearinghouse or will they stop until after the season?

“Since the clearinghouse is voluntary, we’ll see how agents act at that point,” said Peltier.

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Topics Carriers Agencies Florida

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