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Fidelity Insurance Company has issued a notice of termination to our brokerage. According to them our loss ratio is too high. Recently, Los Angeles experienced wild fires. A good portion of our clients reside in the areas affected by the wild fires. How can we control our loss ratio? We don't believe that we are being treated fairly.

If anyone else is having this issue I would like to hear from you.

We lost our appointment also for lack of production. They are not that good or we would have produced more. Also, they have a very high complaint ratio on the DOI website so I don't really miss the appointment.

We're hanging by a thread with them,

: (

As agents, we are responsible to attempt to be a profit center for our insurance companies we represent. Fidelity left Michigan 2 years ago with a 400% statewide loss ratio. We had a 0% loss ratio.

We all have shock losses. Spread your account risk so if an area has a problem it won't become yours.

Find another carrier.

Good luck,
MI INS GUY

Since when is the word 'fair' part of the contract between a carrier and an agency?

Look, in urban wildfire interface areas, especially in California, many companies try and mitigate their risk tolerance by utilizing some program like Risk Meter, or their own observations. Some carriers are more tolerant than others, and therefore, risks in those areas tend to have coverage with largely the same carriers. Often, it's the direct writers who will pay less attention to fire/brush risk in order to increase market share. That can be very tough on independent agencies who face much higher rates or declines on potential clients while the direct writers place dwellings at preferred rates with the captive agent carriers.

The fact that your agency placed a lot of homes with Fidelity says to me, they were one of the easier carriers to do business with in those areas, and thus, when the fire arrived, they/you suffered a much higher loss ratio than perhaps your other appointed companies that refused to insure in that area. Now Fidelity has looked at their balance sheet, and reallized that collecting $1000 in premium for four or five years in return for a $1million loss isn't a way to keep the investors happy, and they want to pull back.

It's a struggle to be a retail agency in a California brush area, when direct writing companies play by very different rules than your carriers. As someone much wiser than I quoted...'life isn't fair'. It's no different when one of my carriers chooses to revamp rates upward, while my other carriers don't. It's disruptive and a bucket load of work remarketing, but that's the business I've chosen to try and make money in, and I roll with the punches. These days, it seems like there are more punches.

CAN A BROKER SUE THE CARRIER FOR THEIR TERMINATION? MY QUESTION IS, CAN A CARRIER TERMINATE A BROKER FOR THOSE FABRICATED REASON? THANKS.

I cannot imagine losing that appointment being a big deal for any agency. They are not special or different in any way.

JODINGWANG wrote:CAN A BROKER SUE THE CARRIER FOR THEIR TERMINATION? MY QUESTION IS, CAN A CARRIER TERMINATE A BROKER FOR THOSE FABRICATED REASON? THANKS.

First, typing in all caps on an internet forum is considered to be 'shouting', so please use upper and lower case letters.
Secondly, agency/carrier contracts tend to be 'at will' agreements, and can be terminated with the outlined notice at any time by either party. A high loss ratio, regardless of the reason, is not considered to be 'fabricated' if indeed the numbers are what they are. Certainly, it's not the fault of the agency that large scale fires occurred, but if the only way the carrier can see staying in business is to withdraw from writing new risks in defined categories, then termination of the contract is what it is.
Good business practice dictates that no agency put itself in the position of having no other options when an appointing carrier decides to pull the plug. I will continue to speculate that this agency placed large numbers of homes in this area with this carrier because their underwriting guides allowed it at a good rate. It was a gamble that the carrier took and lost. Other carriers are more conservative about urban brush interface risks and don't have this kind of issue. It can be a major challenge for an agency located in an area with such characteristics, especially when direct writers often have a large capacity for such property risks...but that's all part of the game.