FSLA Leader Sees Soft Market Opportunities in State Farm Exit, Med Mal, EPLI

The Florida surplus lines industry may be challenged right now by regulatory uncertainty stemming from the Essex and CNL Hotels rulings but it is not letting that blind it to opportunities.

One opportunity is the pending pullout by State Farm, according to Steven Finver, president of the surplus lines agency Continental Agency of Florida in Boca Raton and president of the Florida Surplus Lines Association.

“I think the state is very happy to see them go. There are places for that business,” said Finver of the 1.2 million home, boat and small business policies State Farm will be nonrenewing. Finver says the surplus lines industry is “absolutely, absolutely” capable of absorbing some of the business. “We all do what we do every day anyway,” he said.

Finver would like to think there will be opportunity in medical malpractice because the prices have come down and he thinks all doctors should be covered. But old habits die hard. “They’re self-insuring. They’ve not had to buy insurance for so many years they’re used to not buying it now,” he said. “[E]very year they don’t buy malpractice insurance, but they can buy a Porsche.”

If medical malpractice isn’t the surest bet, employment practices liability insurance (EPLI) comes close to being one. Finver says it’s becoming increasingly popular. “They have made it very inexpensive to have the small companies add it to their policy or write a separate policy for it,” he said. “To me, every company that is in business should have an EPLI policy because they are inexpensive and it is a major way to protect yourselves, especially in this economy.”

In an age when everyone pulls credit reports, Finver thinks anyone who rents apartments to tenants should be buying tenant discrimination coverage. If a person is denied a rental because of poor credit then “there is the risk of a discrimination lawsuit.”

New opportunities are especially in demand because the market is still soft. The market “should” be hard, according to Finver, but it isn’t yet. “I think the market’s still soft. I can see pockets of hardening, with certain carriers, certain things in London. I see them trying to harden the market,” he said.

Finver does think there will be a hardening eventually, starting at the end of the second quarter. It won’t be a normal hard market and Florida may not benefit as much as other parts of the country, but these aren’t normal times. “In a normal world, in a right world, the market should be hard today. But the economy is so bad that there’s no sense having a hard market right this moment today … if consumers can’t pay for it,” he said.

Finver says that in today’s economy it makes no sense for insurers to raise rates to $200 when buyers can’t afford $100.

He’s hopeful things will get better.

“I think things are bad, but they may not be as bad as they seem. If we can get some consumer confidence back into this country and people start spending again and opening businesses again, at that same time if the market tightens a little bit, everyone will be in a much better shape a year from now.”

The condition of the market and the economy can influence what a retail agent looks for when selecting a surplus lines agent, according to Finver.

“Sometimes it’s price, which I think it is right now, and sometimes it’s service. I think a good combination of both is what you should look for. But if you want my feeling on what a retail agent should look for, and it’s really one word, and it’s quality.”

He means quality in carriers, quotes, pricing and service. “[I]f you deal with quality you will end up with quantity. The better your quotes are, the quicker you get them out, the more business you can get in your door,” he said.

Sometimes a surplus lines agent can’t write what a retail agent needs. In these instances, quality service can mean being willing to an extra effort.

“Maybe it’s a risk that I have no market whatsoever for, needs some limits, whatever the case may be. But I may have a friend who’s our competitor and who has a market. We will refer to them. That solves the retail agent’s problem and that’s what you care about doing,” Finver said.

Topics Florida Agencies Excess Surplus Pricing Trends Leadership Market