Hard market hits homeowners insurance

Hard market hits homeowners insurance

Zinkewicz, Phil

MacNeill has plenty of capacity in Florida henever the property/casualty insurance industry is in the midst of a hard market, as it is today, the lines of coverage usually affected most are the more volatile liability lines-medical malpractice insurance, directors and officers, accountants and auditors liability, errors and omissions, etc. This is especially true today. The severity of losses in the medical malpractice field speaks for itself, as malpractice insurers continue to withdraw from the market. Insurers are wary of writing directors and officers liability, accountants and auditors and errors and omissions in light of the corporate scandals that have rocked the securities industry. And then, there are the tried-and-true hot spots such as environmental impairment liability and asbestos liability, which represent difficult lines even during soft markets.

However, rarely does one think of personal lines homeowners insurance as a line of business that reaches crisis proportions, even in a hard market. Of course, when the property/casualty insurance market hardens, homeowners insurance rates will go up, just as with all other lines of coverage. But homeowners insurance in a crisis situation? It just doesn’t ring true.

Nevertheless, according to the National Association of Realtors (NAR), homeowners insurance is reaching crisis proportions in certain states. The NAR says that the number of “homeownerships” is on the verge of dwindling rapidly as insurers are not making homeowners insurance either available or affordable in the general marketplace. The association points to Texas and California as two states where homeowners insurance problems are particularly troublesome.

The main difficulty is potential water damage and resulting mold scares. The NAR charges that insurers, frightened off by potential mold damage, are using information obtained by credit scoring and from CLUE (Comprehensive Loss Underwriting Exchange) to redline some homeowners risks, just to avoid the potential mold exposure.

The Alliance of American Insurers (AAI) and the National Association of Mutual Insurance Companies (NAMIC) have hotly denied charges of redlining and have said that insurers have been using credit scores and CLUE for years with no problems. They say that, while homeowners rates are going up, it is the natural result of the current hard market.

Not a problem for MacNeill

That’s a debate that’s bound to go on for some time, but the question remains: Is there an affordability and availability crisis in the homeowners market? According to Douglas W. Bullington, president of the Florida-based MacNeill Group, Inc., “Florida’s market is somewhat unique in that the ultimate capacity crisis for the consumer was solved when Florida created the FRPCJUA, now know as Citizens Property and Casualty Insurance Co. in the aftermath of Hurricane Andrew.” Asked whether water damage and potential mold has become a problem in Florida, Bullington said, “No, not like in some other states and certainly not statewide. We have been watching very carefully how the mold issue has evolved in other states and we recognize that in certain places homeowners insurance may have reached crisis proportions as a result of the mold exposure. Here in Florida, carriers have recently been authorized to place limits on parts of the mold exposure.”

The firm was formed as a proprietorship in 1946 by Frank R. MacNeill. The name MacNeill has been synonymous with insuring homes in the state since the company was founded as a managing general agency. Under the guidance of the company’s founder, and later Malcolm G. MacNeill, the company prospered and grew, writing primarily personal property and some commercial lines business. “As the business expanded, so did the lines and companies we represented,” says Bullington.

In 1989, a subsidiary of Jardine Lloyd Thompson, one of the world’s largest insurance brokers, purchased MacNeill and in 1991, Thomas B. Rogan, a MacNeill employee since 1960, was appointed president. “In 1997,” says Bullington, “MacNeill was awarded the distinguished designation of Certified Managing General Agent; and we are proud to be one of a select number of managing general agencies nationwide-and the first in Florida-to receive this prestigious award from the American Association of Managing General Agents (AAMGA).”

After being named president of MacNeill in 1998, Bullington was afforded the opportunity to purchase the company in June of 2000. He then renamed the company the MacNeill Group, Inc.

Bullington says, “We consider ourselves a ‘traditional’ MGA, in the sense that we have always operated principally in the standard admitted lines market offering our independent agents a wide range of products from a distinguished list of carriers which are fully supported by us in all areas of the process.” Working primarily as managing general agents with underwriting authority for carriers represented, MacNeill produces business through more than 2,700 licensed independent property/casualty agencies throughout Florida. “We also can provide program administration services; assistance with new company formations; program/product development, including rates, forms and filings; and actuarial, statistical and analytical services,” says Bullington.

Expansion plans

MacNeill is focusing its resources towards diversification and expansion. First, into the E&S commercial business and, second, geographical expansion into key coastal states where the expertise of the management team can be fully utilized.

Bullington says, “Florida continues to challenge us to find suitable property capacity, both in personal and commercial lines. It takes a certain expertise to garner needed capacity. Our success to date in this area has been through multiple carrier solutions where each carrier brings an added layer of capacity, and rates, rules and forms that suit each risk bearer’s appetite,” he notes. “We are always looking for more capacity and, in certain parts of the state there is simply never enough.”

Bullington says that the 2,700 independent agencies his firm has appointed cover from Key West all the way to the tip of the Panhandle. “Not all of them necessarily represent every program or product we service,” he says. “Some write only homeowners with us, others small commercial accounts. Whether our agent partners represent one program or all programs, our success to date is based on two things: first, service-we make certain we have qualified people internally to make sure we satisfy the agents’ needs; and second, capacity-we provide as much capacity and variety as possible for those agents and their clients.

“Our expansion plans are meant to create diversity in our current business model but still stick with our core capabilities that will focus on providing products to the small- to medium-sized independent agents,” Bullington maintains.

“Florida will always be our home state and a major part of our production goals,” he continues. “It’s been our home for over 55 years and is one of the three fastest growing states in the U.S. But when you consider we specialize in writing property risks and have an expertise in aggregate management, it makes sense for us to provide our clients with more geographic distribution.”

In addition to working with insurance companies and independent agents, Bullington believes that networking with other MGAs is equally crucial. “I learned early on in my career the importance of relationships. It is the cornerstone of our success and why our ongoing relationship with the AAMGA is so important,” he says. “I have had the privilege over the 22 years of my insurance career of learning about the insurance business and the do’s and don’ts of our industry from one of the best, Tom Rogan, and I can remember Tom telling me many yearso ago `the AAMGA will help MacNeill build lasting relationships with other MGAs, insurance companies and brokers at Lloyd’s.'”

Tom became active in the AAMGA early in his career at MacNeill and immediately saw the value of membership in the association. Today, as a past president of AAMGA and an advisor and consultant to MacNeill, he continues to champion the role of the association in MacNeill. “The AAMGA continues to be very much a part of our business model,” Bullington says. “Even today, key members of the MacNeill Group are active in various areas of the association. The opportunities to network with our fellow AAMGA members at regional and annual meetings, and enhance our professionalism through participation in the many class offerings is an added value to the many benefits we get by being part of this prestigious association.”

Finally, Bullington says that one other major part of a successful MGA business model is an aggressive commitment to automation. “It’s not just the willingness to spend the money,” he says. “It’s making the investment in senior management’s knowledge of IT so their analysis can make a difference in the decisions you make. Information technology is no longer just a support arm of your business; it is a critical link to you company model.

“Here again is an example of where the AAMGA has played an important role in how we do business. The AAMGA established a committee many years ago to keep its membership up to date on emerging technology trends. Every year, the committee presents a conference dedicated to technology and business issues related to technologies in the MGA marketplace. Look no further than the record attendance the past two years to see how vital the issue has become.”

Copyright Rough Notes Co., Inc. May 2003

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