The Texas Windstorm Insurance Association held its final quarterly meeting on Dec. 12 in Corpus Christi, where the board of directors voted to approve the association’s budget for 2024.
The board also voted to keep agent commissions unchanged after listening to candid testimony from agents on the harm a reduction in commissions would have on their agencies and the policyholders they serve.
TWIA, the insurer of last resort for coastal home and commercial property owners who cannot get windstorm and hail coverage on the private market, forecasts that policies in-force will grow to nearly 265,000 by the end of 2024. Direct written premiums are projected to grow to just over $815 million by the end of 2024, up 23.5% from FY 2023 forecasts.
TWIA’s 2024 budget projects net operating expenses to increase to $40.2 million compared to $35.2 million in the 2023 budget. While TWIA’s operating budget is increasing, the association’s budgeted expense ratio is projected to falll from 6.5% to 5.4%. The budget projects a balance of $461 million in the Catastrophe Reserve Trust Fund (CRTF) at the end of 2024, up from the current $278 million.
At the meeting, TWIA’s board directed staff to engage Gallagher Securities and others as recommended by Gallagher to begin the process of placing the 2024 reinsurance program. The board also completed its annual performance evaluation of general manager David Durden in a closed session. The board voted to increase Durden’s salary by 3.25%.
Agent commissions to remain same
Much of the meeting focused on whether TWIA should consider cutting agent commissions.
The board ultimately voted against a proposal to cut commissions from their current rate of 16%. A second vote was taken to keep all agent commissions at 16%. The board was not required to take action on the matter, but the second vote concluded the board’s recent exploration of the issue.
Prior to the vote, the board received an update to an agency commission study. The update included a time study that documents the time it takes for agents to complete residential policies on new business, changed policies and renewals. The study, put together by Dallas-based Insurance Technology Services (ITS), timed 48 policy transactions at 10 agencies.
ITS’s summary found that TWIA’s processes and system to quote new business are comparable to other carriers, while stating that TWIA’s specific requirements can be simple but also can be time-consuming and complicated. TWIA’s system for renewals was also comparable to other carriers, ITS found, with the exception of the requalification required every three years.
Garry Kaufman, president of Galveston Insurance Associates and chair of the TWIA Agent Advisory Group, reported agency feedback to the board. Kaufman shared that agents continue to experience significant additional work compared to other carries they do business with because of TWIA’s unique eligibility requirements.
Kaufman said the extra work that goes into processing TWIA policies justifies their present commission rate of 16%, which is above the average 14.8% agents receive working with other carriers.
“It takes my staff more time and costs me more money to sell and service a TWIA policy,” Kaufman said.
Kaufman noted a 1% decrease in TWIA commissions would equate to a 6.25% reduction in income.
“Paying agents to do less for the same work is punitive,” Kaufman said.
After a public comment period that saw many agents argue to keep commissions where they are, the board briefly discussed the matter. Chair Chandra Franklin Womack advocated for agents, likening them to Amazon’s Last Mile delivery solution.
“That’s what our agents are.” Womack said. “They’re the last mile for us. They’re the people who are out there touching the customer in that last mile. It’s not a cheap process. I don’t think we should devalue what they contribute by reducing their rates.”
Not everyone on the board agreed that agent’s commissions should stay put.
Representative Ron Walenta brought forth a motion to cut the agency commission rate to 12.5% on new business and 10% on renewals in a move for TWIA to balance its books. Walenta encouraged the board to allocate more money to the CRTF in case of a major storm season.
“To be here, we have to have the money to be able to pay claims,” Walenta said.
The board voted 7-2 against Walenta’s motion. Walenta and Rep. Tony Schrader, both Non Seacoast Territory representatives, were the two yes votes.
The board then a second vote is to keep all agent commissions at 16%. The Board was not required to take action on the matter, but the second vote concluded the board’s recent exploration of the issue.
The board will next meet on Feb. 20, 2024 in Galveston.
Topics Agencies
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