Peoples Trust, the direct response carrier that innovated its way into Florida’s homeowners market in 2008, is now selling some new policies the old fashioned way!
You may recall its big splash. Peoples Trust sent ripples across Florida with promises of 70% savings due, in part, to the elimination of agents which company flyers claimed not only made up to 25% commission but also sold unneeded coverages to boost their income.
Things changed quickly, however. Peoples was cited for hundreds of regulatory violations and slapped with precedent setting fines from OIR for rating law and reinsurance violations and from DFS for using unlicensed personnel. (See NOTE #1 below)
Allowed to keep its 30,000 policies Peoples took on a substantially lower advertising profile, “licensed” its in-house CSR’s and kept its head above the water.
Fast forward–now, in one of the more notable ironies in memory, the carrier that blamed agents for much of Florida’s problems is hiring them to sell its product. And, so far at least, it feels like a good fit.
In fairness… Peoples President and CEO, Michael Gold, a former business machines executive, confessed publicly to some naivete when it came to insurance regulations and underwriting. But, he appears on track now, not only with the regulator but with the competitive realities of Florida’s market; especially independent agents.
His early criticisms of their role and the impact of their commissions a thing of the past, Gold said in a phone interview…“there’s ample room for a dual distribution channel”
“Customers attracted to direct writers are almost exclusively price shoppers. They aren’t interested in the services an agent provides…agents bundle policies and have long term relationships.”
“You can do the math as easy as I can..” he said, which I took to mean that for internet carriers, the substantial cost of advertising offsets savings from eliminating agents’ commissions. Like GEICO and others, profit comes mostly from multiple renewals by policyholders that have a tendency, as Gold said, to be “…price shoppers.”
So, now…not only is Peoples appointing agents, about half a dozen at the time of my interview, but…like every other carrier in Florida, it’s paying a commission substantially more than his prime competitor…Citizens.
And, in addition to 11% new and 9% renewal for agents, Peoples fully recognizes an independent agents ownership of expirations and the customer information–unlike one or two exclusive agency companies I can think of.
Last year Gold infused another $25 million into the company and finished off the year a little shy of $40 million in premium volume.
“We purposely haven’t grown in the last year” he said, and, in fact, the policy count actually shrunk a bit due to “excluding those that were poorly underwritten.”
Like most newly formed domestics Gold also had to wrestle with reinsurance.
A typical mono-line, unaffiliated, domestic carrier might reinsure over 90% of its catastrophe exposure–usually via entities less concerned about retail premiums than supply and demand pricing or strict underwriting.
So Michael Gold created his own “captive” reinsurer called Del-Re. “The OIR feels secure with the arrangement” he said. And, since it’s a full partner in his trio of companies which includes an MGA, Del-Re can charge premiums allowing the retail operation to compete with many private carriers and, according to some of its newly appointed agents, occasionally with Citizens.
When I asked if he was only interested in writing new business or would he take policies out of Citizens, Gold didn’t hesitate–takeout companies…“they’re nuts” he said “… and you can quote me on that!”
Any savings on reinsurance is undoubtedly aided by Del-Re’s favorable view of post-catastrophe “demand surge” at Peoples; likely attributable to its Rapid Response Team.
Controversial to say the least, according to Gold his fully owned construction and restoration company of 60 full-time employees housed at three locations around the state, performs all of Peoples claims work. He doesn’t use local contractors and subs and his warehoused supplies aren’t subject to increased pricing created by the surge in demand after a big storm.
Policyholders agree in writing that Peoples will repair their damage after a loss, but…Gold also said we “will install and upgrade or they can go to Home Depot and buy it and we’ll install it.”
It’s all made possible, he said, because “we inspect in and out of the whole home with our own crews, go into every house, photos, video’s, and counsel homeowners on pipes and fires…we walk on every roof!”
Between these inspections and his Rapid Response Team, which is “on call twenty four-seven” Gold said…“this cuts out the fraud!”
Gold promised that a new policy management system is coming soon and it will help cut processing costs for agents. He’s looking to appoint about twenty five new independent agents total by year end 2012 and comments…“My family is in the [agency] business so…I understand the agent market and have the highest regard for 99% of them.”
Interested agents can call Peoples Trust marketing VP, Mark Bowsher at 561-417-1132.
NOTE #1: Eventually, both the OIR and DFS stepped in suspending company operations and fining it a total of $250,000. Over $100,000 was from the Department of Financial Services making Peoples Trust managing general agency the most fined MGA in history, at the time.
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