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Florida is a catastrophe-prone state when it comes to weather, but the challenges that come from a non weather-catastrophe like the current COVID-19 pandemic bring about a host of new issues that Florida insurance agents are just learning how to deal with.
“With hurricanes, we’re used to catastrophes and the aftermath,” said Florida Association of Insurance Agents President Jeff Grady. “But this is a bit different when you’re looking at orders to shelter-in-place, what that means as to who can operate, and what your clients can and can’t do.”
As of March 31, the state had 6,741 cases of coronavirus and 85 deaths. As of press time, Florida Governor Ron DeSantis has issued an order for all South Florida residents to stay home, but had not issued a statewide shelter-in-place order though many counties have implemented such directives. UPDATE 4/1: DeSantis issued a statewide stay-at-home order on April 1. Insurance agents across the state are now working remotely and doing their best to help their customers during these times of uncertainty.
Grady spoke with Insurance Journal about helping agents as they navigate this new normal, and what FAIA has asked from state officials and regulators to ease the process for agents to conduct business.
Insurance Journal: What information are agents looking for now? What are their biggest concerns?
Jeff Grady: One of the first things is to be sure the agents are [classified] essential service providers and making sure that they can get to work if they need to. What’s interesting about that is a lot of agents are small businesses and they are in the middle of trying to set up remotely but also have some people that come to the office for critical functions. So, they are a little bit nervous about what status do they have and are they going to be able to get into work. And if they have to work, are they going to have enough employees that can report there. Because again, there’s just so many circumstances that are causing people to be out. We’re dealing with that quite a bit and making sure they know how to be set up so that they can work a little more easily remotely.
IJ: Are there any Florida-specific concerns or issues that agents need to be aware of?
Grady: Because of a beleaguered property market that Florida has, and by the way, that was taking place before the pandemic, we have a lot of non-renewals and cancellations that are pending on the property side. And right now, those are ongoing and there is functionality within companies, and Citizens (Florida’s state-run insurer of last resort), and some agencies, but that’s getting more difficult. And if we go to any emergency order where there is a “shelter in place” order and the closing of non-essential businesses, we don’t believe that that is a situation that can stand. We would have to formally request that those be postponed for some period. But there’s a lot of that transactional business to take place over this period of time, and it’s very difficult for consumers to find replacement coverage, and certainly, for agents to process that.
IJ: What information or resources are agents seeking right now from carriers and regulators? Is FAIA in contact with the regulators about how to handle these types of situations as they arise?
Grady: The one I mentioned is one that we’re in constant contact with regulators about. There is quite a bit of concessions being made by carriers right now, [such as] extending payment terms. …In the admitted market you see a lot of national and regional carriers communicating to their policyholders and agents that they are going to be flexible on terms, but the non-admitted market is a little bit more distant on that and it’s a little choppier as to what certain carriers might do. … We’re hoping and we’re going to encourage that the non-admitted market look at ways to help the consumer. (Editor’s Note: FAIA sent a formal letter to the Florida Office of Insurance Regulation on March 27 asking that it issue additional guidance for premium audit provisions and one-time exposure adjustments to all excess and surplus lines carriers with general liability policies-in-force in the state of Florida as of March 2, 2020.)
IJ: How are agents adapting right now?
Grady: Well, first of all, we sometimes forget the spectrum of agents that we’re talking about here. It’s not [big agencies] with contingencies, with a lot more resources than what is typical of an independent agent, which is about an eight or 10-person entity. The idea of just flipping the switch and turning everyone into a remote employee is not easy. They’re not set up that way. So we’ve been trying to assist our members with workarounds and how you can get your computer set up at home and still interface with your agency management system, a lot of that, how to work remote.
I think this is going to be good for agents. I think a lot of agents have been exposed to this previously because of hurricanes, but those who haven’t are learning some lessons in how to do it and they’re going to have to do it.
One last thing … we have kind of unique license here that was born in a time where you only worked from the office, and it’s a 4-40 license, it’s something just below a general lines license. There was a requirement that type of license could not work from anywhere but the office. So we had to get that waived and the agents were nervous about that until such time. But those are kind of the operational issues; how to set up remotely, how to protect yourself from cyber liability, some of the labor issues that you might have with people who are now working remotely, how to keep track of them, how to track their hours and things like that, that are good in general for small business owners.
IJ: Are agents hearing a lot from their customers right now?
Grady: Yeah – lots of questions of course around business interruption, but also, “I don’t know if I’m going to be able to make my premium,” or, “I don’t know if I’m going to be able to do this anymore,” – agents are fielding a lot of those calls. What I see them doing is being good caretakers and pushing those questions up to the decision makers, which in this case oftentimes are the carriers. So there are some requests before carriers and that’s how I think you’re starting to see some of these broader announcements by carriers coming out and giving flexible terms to the client.
IJ: You mentioned cyber liability – what are the biggest exposures to agencies working from home in terms of cyber E&O? Any others?
Grady: A lot of small businesses don’t have that robust layer of protection of cyber liability in their office. Interestingly, we insure around 1,100 agencies, and about a third of those buy cyber liability policies from us. We know … there’s a higher take-up rate and surely more than just that. But [with this] where you’re bringing stuff out of your office and having someone take their PC home or their laptop home and in the panic of coronavirus, clicking on something that becomes malware that infects their server. … We’re talking to them and showing them ways that they can protect themselves and just things to be mindful of.
IJ: What impact could this situation have on an agent’s book of business?
Grady: Insurance will continue to be needed even by businesses that have seen a significant reduction in their sales. But in those cases, the exposure base has been reduced, the premium is being reduced and the commission’s being reduced. So, you’re looking at the real possibility, depending on what segment of business your agency serves, of seeing a revenue reduction. And in fact, some of the hardening market may be a buffer to any income loss they may otherwise see. But, depending on what specialization the agency has will more or less say how severe it changes. I think that a lot of agents are going to struggle with watching some of their clients disappear from this. … Agents are going to be impacted, but they are in a rather recession-proof business, as everyone always says. And I think they’re going to really feel the sympathy or empathy on behalf of some clients that are having bigger struggles than their own.
IJ: Has the state of Florida’s response helped or hurt agents do their jobs right now?
Grady: Our regulator is very flexible, very willing to do just about anything that we ask and they believe is a prudent measure, [but] we haven’t been so quick to jump to some measures that other states have taken. I’ll give you an example – CE (continuing education) compliance. There’s CE compliance dates that are going to take place during this period of time when we’re on lockdown. But our state has not issued any formal extension of that where some have. Folks believe that online resources are there and they’re plentiful, we certainly have them at our association, and agents can switch to that alternative. If there is an exception to that, all they got to do is ask. But I see that as a slightly different approach than some other states are taking. We don’t have a shelter in place order. We don’t have some of these broad sweeping orders because I think they’re trying to preserve what they can of the marketplace and then making an exception for those who can’t comply.
And there’s been some other states as you know, that have really taken up this business interruption subject and what is there, or what’s not there. Our state has resisted that. That issue, I think, is being fleshed out big time at the federal level. But I don’t know that you’re going to see Florida weigh in on anything like that.
Back to the question about how agents will be impacted in dealing with their customers, I don’t know that there’s going to be an onslaught of agent E&O cases due to lack of business interruption coverage, but it wouldn’t surprise me to see a few there. That is a coverage that is probably one of the most misunderstood. In most cases, almost in all cases, the language would exclude losses due to the pandemic, but that answer may not be good enough for the social welfare of our country, so Congress is looking at ways that they may be able to intervene there. To the extent that, that impacts agents.
IJ: It’s just a couple months away from the start hurricane season… is there anything that agencies are doing to prepare insureds for when this is over and business resumes? Is everything on hold right now?
Grady: Except the onset of hurricane season, everything’s on hold.
IJ: Right, Mother Nature’s still going to be here.
Grady: I know. And it’s really frightening to think of that. Thankfully, it doesn’t usually show up here until the end of August … We’ve been through that drill unfortunately, so many times. Hopefully, this doesn’t complicate matters. But no, we haven’t said anything differently or have told them to prepare any differently, given this current situation. Florida agents are pretty tried and true on the idea of responding to hurricanes – and I guess that’s one silver lining. As I said, in this case, they have been told to stay away from their offices before, they have been in a situation where moratoriums have been passed before, they have had payments get extended before, so there is some experience with this, just from a different cause.
IJ: What else do you think is important for agents to know right now?
Grady: We’re trying to make the best of what we can and keep agents informed. And I guess to the extent that we can avoid huge sweeping shutdowns in our state, we’re going to. … If [Florida] does go to a “shelter in place,” it’s a little bit of a different answer to some of these questions … We would ask for a formal stay or moratorium on renewals and pending cancellations if that were the case. There’s probably anywhere from 40,000 to 50,000 of those currently in the air in Florida right now and they’re starting to take place. As far as I know, there are still ways to do that, but it will become increasingly difficult if we get the order I mentioned.
IJ: Are you concerned at all about the impact of all this on the Florida market?
Grady: Yeah, absolutely. The ongoing saga of the Florida property market … The truth is several of these carriers had serious financial challenges prior to the coronavirus and we were on this same narrative before all of this started. … I know that this circumstance that we’re dealing with now only adds to those troubles. And I think that any asks for a moratorium or suspension presents issues to them … All of that stuff is being taken into account. We’re taking that into account. We don’t want to unnecessarily yell “Fire” in a crowded theater. But we also don’t want consumers to be put in a situation where they really can’t make a change, much less agents who are working to bring about that new alternative. It’s kind of a fine line right now with how hard you push on that given the condition the Florida property market is in.
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