American Sterling Insurance Company terminated the president of its personal lines division, Michael Galati, along with 12 other employees, on Feb. 22.
The Laguna Hills, Calif.-based company also suspended alliances with 37 of its producers.
“Our senior management at the corporate level felt that the company needed to go in a more profitable direction in order to be a permanent player in California,” Kwan Lee, assistant vice president of operations and former assistant to Galati, told Insurance Journal.
Lee said that American Sterling has specific underwriting guidelines that were being ignored by some of its producers, with the result that “we notified them that we would no longer accept new business from them.”
Among the problems Lee described were “mileage discrepancies, misuse of vehicle usage, undisclosed drivers or drivers with suspended licenses.” The discrepancies were discovered when American Sterling received incomplete applications and had to call back to obtain the missing information, or when they ran the MVRs. American Sterling management was notified of the changes on Feb. 21, and the terminations were effective on Feb. 22.
The suddenness “took us by surprise,” Lee said. “I have worked with Mike for the last 13 years. We thought we had everything under control, but our senior management felt that our current book of business wasn’t profitable based on what’s happening in the industry today; and as a result, they reorganized and cut our staff.”
American Sterling Insurance Company, which is rated “B+” by A.M. Best, provides a market for brokers and agents who write preferred and nonstandard auto, homeowners, condominium, renters and personal umbrella insurance.
The company is privately held by the American Sterling Corporation, which was incorporated in California in 1984 and has combined assets of $300 million. Other members of the American Sterling Group include American Sterling Bank, American Sterling Bank Wholesale Mortgage Lender, American Sterling Insurance Services, American Sterling Productions and American Sterling Philanthropy, according to the group’s website.
Michael Thompson is the president of American Sterling Group.
“The California market is hardening, and we need to be in a position to provide for the insurance needs of the marketplace,” Lee said. “We are not changing our products, but we did decide to hold off on our business owners program, and the umbrella will be pushed back to June. But our homeowners, preferred auto and nonstandard auto are still in place. We expect to maintain our current volume and to grow from here.”
Lee is slated to take on the position of chief operating officer in charge of the insurance division, following a final board decision. “All the key players are here to regroup and to go forward,” Lee said. “Going forward, the underwriting guidelines that we put in place must be followed. We’re here for the long run, and our reputation is at hand. In order for us to be profitable, these changes had to be made.”
Lee stressed that throughout the reorganization, American Sterling’s service standards would remain at the highest level.
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