• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Johnson Strategies

Planning, Communications, Advocacy

  • Home
  • The JS Story
  • About JS
    • Mission
    • About Scott
    • Writing
  • Videos
  • Library
    • AOB prior to reforms effective July 1, 2019
    • AOB on and after reforms effective July 1, 2019
    • Citizens
    • Legislative Glossary
    • Government Studies and Reports
    • Miscellaneous Documents
    • Presentations and Powerpoints
  • Links
    • Government
    • Other Helpful Sites
  • Contact
You are here: Home / Citizens / Citizens Clearinghouse…and State Farm Agents

Citizens Clearinghouse…and State Farm Agents

September 24, 2013 - Opinions by Scott Johnson 2 Comments

With the caveat that it’s far too early to speculate on its’ market impact, I will say that I’ve had more than one conversation with an independent agent convinced that Citizens Clearinghouse is nothing more than a competitive reprieve for State Farm agents.

I believe it to be just the opposite.

First, let’s be clear.  Whatever the ultimate impact of a Clearinghouse, it’s existence as a viable mechanism for channeling Citizens applications to the private market, is a ways off at this point. Even though the January 1, 2014 statutory deadline is in just three months, I believe it will be met.  SEMCI (Single Entry Multiple Company Interface) was, after all, beta tested by independent agents years ago.  Though its full impact won’t be known until January 1, 2015, the Clearinghouse will technically be up and running with at least one or two carriers by Super Bowl XLVIII.  My opinion, of course.

The belief that a Clearinghouse will save State Farm agents is grounded in the assumption that they are in need of saving–strapped by exclusive representation of a carrier that not only hasn’t written new residential property business in eight Florida counties since Hurricane Andrew but, also threatened a few years ago to pull out of Florida altogether.

The result has been that the only choice for State Farm agents has been Citizens; something independents think will change once the Clearinghouse is in full swing.

The Clearinghouse, they believe, will allow “all” agents sending policies to Citizens to receive Limited Appointments with any company willing to write any policy that, for comparable coverage, has a price not more than 15% higher than Citizens.  This means State Farm agents could receive appointments with agency carriers willing to write the residential property coverage State Farm has abandoned.

But, not so fast!

State Farm agents already have permission to accept Limited Service Agreements (LSA’s) with takeout carriers approved by the mother ship. This was only allowed so State Farm could protect its captive arrangement while deflecting criticism that its agents would always reject, on behalf of their customers, takeout offers from viable carriers.  At one time the total number of carriers authorized by State Farm to enter into LSA’s with its captive agent force was sixteen (16).

Will State Farm grant the privilege of appointments with all, some or none of the Clearinghouse carriers?  Nobody knows at this point.

Meanwhile State Farm agents have enjoyed unfettered access to Florida’s residual market featuring, at various times and degree’s, a guarantee of solvency, better coverage and a lower price. As Citizens price gradually increased under the 10% annual rate cap and its coverage waned, State Farm agents have continued to compete with independents via a sales pitch alleging “thinly capitalized” carriers are not as good as Citizens and a considerable auto policy discount available only when the homeowners policy was written in Citizens.

But, with a Clearinghouse, all that could change.

Remember, every policy submitted to Citizens receiving a Clearinghouse offer less than 15% higher than Citizens, is ineligible for Citizens coverage…period!

The fact that the policyholder loses an auto discount is no longer a factor.  And, neither are any of the other competitive tools previously available to State Farm agents.

Ask yourself, “why would a company that appoints independent agents appoint State Farm agents if it could find a way to avoid doing so and still write the policies deemed ineligible for Citizens under the rules of the Clearinghouse?”  I believe they would not appoint State Farm agents, “if” they can find any way to avoid doing so.

But, even if they can’t avoid offering a limited appointment to State Farm agents, State Farm agents have lost several competitive tools via the Clearinghouse, as follows:

1) they can no longer control the business they send to Citizens and best case must give it to an agency carrier that has appointments with thousands of independent agents it would rather appoint;

2) for those policies that are ineligible due to the 15% rule, they no longer have the advantage of a substantial auto discount to lock-in the business;

3) they no longer have the benefit of denigrating their competitors as thinly capitalized or financially “shaky”, and;

4) they can’t rely on the Clearinghouse carriers to offer AND maintain LSA’s with them or not to search for ways to transfer business to independents agents they’d rather do business with. 

5) their policies will be non-renewed when a private carrier makes an offer priced less than Citizens and, in essence, the policyholder will have to accept the offer which will have been made by an agency carrier.

So, for those lamenting that the Clearinghouse helps State Farm agents I disagree but, I also caution it’s too early to tell.

I must also say that I have many friends who are State Farm agents and I take no pleasure in voicing this conclusion.

##end##

 

 

facebookShare on Facebook
TwitterPost on X
FollowFollow us
PinterestSave

Filed Under: Citizens, General Property Issues

Reader Interactions

Comments

  1. David Bissell says

    September 24, 2013 at 1:54 pm

    Why would carriers appoint SF agents…? For the same reason Security First and Am. Strategic partner with the likes of Progressive and GEICO…because they’re beholding to no distribution method nor loyal to any agent group and pray only to the alter of profit. The old paradigms of “direct” vs “independent agent” have long been gone, especially in FL, and I don’t believe there’s a carrier left that is devoted to either side anymore. Its a totally chaotic free-for-all marketplace. Try basing your carrier appointments on their commitment to the IA distribution model exclusively today like we tried to years ago and you’ll be out of business.

    Log in to Reply
  2. scott says

    September 24, 2013 at 6:19 pm

    Thanks for the comments Dave and good to know you’re still reading my blog.:)

    I agree carriers aren’t loyal to any distribution system anymore; just the all-mighty dollar. But, here’s where I think we diverge. First, the reason that ASI and Security First partnered with Progressive & GEICO is so their customers could have access to Auto Coverage from a company that didn’t compete with them for property; and, of course, to get a small payment for referrals. With State Farm agents on the Clearinghouse, the domestic mono-line carrier is going to get the business no matter what, so…I’m saying that “if” they can avoid appointing an agent that can’t represent them long term, and probably can’t send them new business, or roll over business to them, or whose business plans and procedures aren’t consistent, etc…then they will try to move the business to independent agents who can give them new business without even sending it to the Clearinghouse, and remain long term. The domestics don’t, and never will, in my opinion…write auto.

    Thanks for your comments.

    Log in to Reply

Leave a Reply Cancel reply

You must be logged in to post a comment.

Primary Sidebar

Unless otherwise attributed, articles on this site are the opinions of Scott Johnson.

To subscribe to Scott’s blog…

JS Contributors

Don Brown
Particularly on insurance issues, Don Brown brings expert legislative acumen to the JS team. First elected in 2000 he emerged as an architect on numerous insurance related reforms, predominantly Property Insurance. He’s been an independent insurance agent for over 25 years and is currently a sought-after speaker, consultant and author. Learn more
David Thompson, AAI, CPCU, CRIS
David Thompson has a well-deserved reputation across the country as a preeminent expert in the Property & Casualty field. Learn more
Bill Wilson, CPCU, ARM, AIM, AAM
Bill is one of the most respected speakers and writers on P & C issues in the U.S. He is recognized by his peers as someone who can explain complicated technical subjects in an easily understood and interesting fashion. His list of accomplishments and awards is legendary. For good reason his books, articles and consulting services are in continuous demand. Learn more
Barry Zalma, ESQ. CFE
Johnson Strategies has relied upon Mr. Zalma on numerous occasions for his research and insight into matters of insurance fraud, bad faith, relevant case law and expert analysis. Learn more

Order Scott’s Books

Collapse of an Evil Empire

Fraud and greed pushed home insurers to the brink. Something bold had to be done. This is the story of the disbarment of Florida’s most prolific litigator leading to the most comprehensive tort reforms in Florida, and perhaps American, history.

What's Past is Prologue

Lessons from the Worst Insurance Crisis in Florida’s History... ASSIGNMENT OF BENEFITS

Fact & Fallacy

Essays & Opinions on Florida's Most Controversial Insurance Topics.

Platforms of Success

What the New Generation of Elite Sellers are Doing and How it Can Work for You!

From Cartels to Competition

The Evolution of Insurance and the History of Florida’s Independent Agent

Recent blog posts

  • AGENTS, ADJUSTERS, INSURERS BEWARE—THE RED FLAGS OF FRAUD!
  • The Delicate Balance: Addressing MGA Concerns Without Creating Market Uncertainty
  • Are Florida’s MGA’s Under Attack?!
  • A Smarter Approach to Hurricane-Resilient Homes and Insurance Stability…
  • How Do Other Jurisdictions Manage Hurricane Risk Exposure?

Blog Archive

  • April 2025 (1)
  • March 2025 (2)
  • February 2025 (2)
  • January 2025 (2)
  • October 2024 (3)
  • September 2024 (2)
  • August 2024 (2)
  • May 2024 (1)
  • January 2024 (1)
  • October 2023 (4)
  • September 2023 (2)
  • April 2023 (1)
  • March 2023 (2)
  • February 2023 (3)
  • January 2023 (1)
  • December 2022 (2)
  • November 2022 (1)
  • August 2022 (2)
  • July 2022 (1)
  • June 2022 (1)
  • May 2022 (2)
  • March 2022 (4)
  • February 2022 (3)
  • January 2022 (3)
  • November 2021 (2)
  • October 2021 (3)
  • September 2021 (1)
  • August 2021 (3)
  • July 2021 (4)
  • April 2021 (5)
  • March 2021 (3)
  • February 2021 (6)
  • January 2021 (6)
  • December 2020 (2)
  • October 2020 (3)
  • September 2020 (2)
  • August 2020 (2)
  • July 2020 (1)
  • June 2020 (2)
  • April 2020 (1)
  • March 2020 (1)
  • February 2020 (1)
  • January 2020 (1)
  • August 2019 (2)
  • June 2019 (1)
  • March 2019 (1)
  • January 2019 (1)
  • December 2018 (1)
  • November 2018 (1)
  • September 2018 (1)
  • July 2018 (1)
  • June 2018 (2)
  • October 2017 (2)
  • September 2017 (1)
  • August 2017 (1)
  • June 2017 (1)
  • April 2017 (2)
  • March 2017 (2)
  • February 2017 (1)
  • December 2016 (1)
  • October 2016 (1)
  • August 2016 (2)
  • July 2016 (1)
  • June 2016 (1)
  • March 2016 (2)
  • February 2016 (1)
  • January 2016 (2)
  • November 2015 (1)
  • October 2015 (1)
  • September 2015 (1)
  • August 2015 (2)
  • July 2015 (2)
  • June 2015 (2)
  • May 2015 (1)
  • April 2015 (2)
  • March 2015 (1)
  • February 2015 (3)
  • January 2015 (1)
  • December 2014 (2)
  • November 2014 (4)
  • October 2014 (1)
  • September 2014 (2)
  • August 2014 (2)
  • July 2014 (2)
  • June 2014 (2)
  • May 2014 (3)
  • April 2014 (2)
  • March 2014 (3)
  • February 2014 (3)
  • January 2014 (2)
  • December 2013 (2)
  • November 2013 (2)
  • October 2013 (2)
  • September 2013 (2)
  • August 2013 (2)
  • July 2013 (3)
  • June 2013 (2)
  • May 2013 (3)
  • April 2013 (2)
  • March 2013 (3)
  • February 2013 (5)
  • January 2013 (2)
  • December 2012 (4)
  • November 2012 (3)
  • October 2012 (4)
  • August 2012 (5)
  • July 2012 (5)
  • June 2012 (4)
  • May 2012 (3)
  • April 2012 (7)
  • March 2012 (3)
  • February 2012 (3)
  • January 2012 (5)
  • December 2011 (6)
  • November 2011 (7)
  • October 2011 (6)
  • September 2011 (2)
  • August 2011 (7)
  • July 2011 (7)
  • June 2011 (4)
  • May 2011 (4)

Tag Cloud

7-7-7 Plan Citizens Insurance oir Rick Scott sb-480 senator fasano senator richter
Unless otherwise attributed, articles on this site are the opinions of Scott Johnson.

Mission: Satisfaction Guaranteed

Johnson Strategies (JS) works to establish and achieve goals promoting products or idea's to customers, state policymakers and the consuming public. This is done on behalf of both corporate and individual clients, non-profit trade associations and membership societies. JS specializes in planning, communication and advocacy for a wide range of interests focused in the property and casualty insurance field. Our simple mission is to guarantee satisfaction based on a comprehensive needs analysis and mutually defined goals.

Categories

Popular Tags

7-7-7 Plan Citizens Insurance oir Rick Scott sb-480 senator fasano senator richter

Post Calendar

May 2025
M T W T F S S
 1234
567891011
12131415161718
19202122232425
262728293031  
« Apr    

Recent Posts

  • AGENTS, ADJUSTERS, INSURERS BEWARE—THE RED FLAGS OF FRAUD!
  • The Delicate Balance: Addressing MGA Concerns Without Creating Market Uncertainty
  • Are Florida’s MGA’s Under Attack?!
  • A Smarter Approach to Hurricane-Resilient Homes and Insurance Stability…
  • How Do Other Jurisdictions Manage Hurricane Risk Exposure?
  • PART II of “What Agents Need to Know About Public Adjusters…
  • Latest Decision on AOB!

[footer_backtotop]

Copyright 2012, Johnson Strategies LLC. Website design/development by Cali Design LLC