A Florida online insurance agency found to have sold homeowners policies using unlicensed personnel will pay a $100,000 fine. The agency will also contact every customer affected and offer to rewrite their policies, under terms of a settlement reached with state officials.
In March, Chief Financial Officer Alex Sink’s Department of Financial Services took legal action against People’s Trust MGA, LLC, charging that the firm that sells direct to consumers online and over the phone had used unlicensed personnel to market and sell homeowners insurance.
People’s Trust MGA will pay a $100,000 administrative penalty, which DFS says is one of the largest penalties ever paid to it by an insurance agency.
DFS said People’s Trust MGA must also send a letter to every customer who bought homeowners insurance between March 6, 2008, and March 5, 2009, if their policies have not already been re-underwritten, offering a review of their coverage with a licensed insurance agent or customer representative.
Customers will have the option to compare policies, re-underwrite their policy, or cancel their policy without penalties and have their pro-rated unearned premiums refunded.
The problems at the MGA were uncovered in March by the Office of Insurance Regulation in a market conduct examination of People’s Trust Insurance Co., which regulators found was growing faster than it should.
People’s Trust only began writing business in March, 2008 but had written more than 20,500 policies worth $22.6 million in premiums by the end of 2008. That’s about $5 million more than it had agreed to write in its first year under the business plan it submitted to the OIR to get its license.
In addition to raising financial issues by growing too fast, the company was found to be breaking insurance laws and regulations in the process. Among its violations: using unfiled rates; failing to obtain required inspection reports, proof of wind mitigation efforts or prior insurance; using misleading marketing materials and mishandling claims.
The OIR stepped in and blocked People’s Trust Insurance Co. from writing any more business and demanded operational improvements. In a consent order signed in March, People’s Trust agreed to halt writing new business and make changes in its operations.
The insurer was fined $150,000, required to post an additional $500,000 in collateral with the state and asked to provide proof of adequate reinsurance. It was also instructed to hire more experienced insurance executives and use only licensed personnel for sales.
According to OIR, the insurer has complied in full with the terms of the consent order. It resumed writing business on Oct. 5, according to its Web site.
According to People’s Trust Insurance CEO Michael Gold, his company was actually cleared to resume business in July but waited until after the hurricane season had passed to start up again.
“We’re writing very successfully,” he said.
He said his company will have $60 million in additional capital to work with beginning in January and expects to continue to grow.
Gold said his firm is re-underwriting every policy, has hired new executive personnel and that it currently uses and has always used licensed personnel for sales.
“We don’t think we did anything wrong,” he said, adding that it just made more financial sense to pay the fines and settle than prolong the regulatory dispute.
People’s Trust MGA must pay the $100,000 penalty within 30 days and mail the policyholder letters, to be approved by DFS, at least 30 days prior to the renewal of the customers’ insurance policies.
“It is my responsibility to make sure Floridians are getting the best advice for protecting their families and homes by properly licensed agents,” said Sink. “Standing up for Florida’s consumers is one of my top priorities, which is why it was so important to ensure that People’s Trust is following the law by only using licenses insurance agents in the transaction of their insurance business.”
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