State probe clears Brooke Corp. of wrongdoing

The Louisiana Department of Insurance investigated complaints against Brooke Corp. from former franchisees in that state and cleared the company of all wrongdoing except for a few minor licensing snafus.

The allegations included charges Brooke does not fully disclose the franchise structure and costs; does not allow agents to verify commissions paid by insurers; rushes buyers into their franchise deals; overcharges franchisees for operating expenses; and intentionally manages the franchise agencies for failure so they can take over and sell the agency.

The Louisiana examination report, issued in January, cleared Brooke on every allegation. It also went further to dispel the charge that Brooke wants it franchise agencies to fail by noting that failed agencies are very costly for Brooke. One Louisiana failure cost it almost $170,000, according to the report. Louisiana examiners found that for the five-year period (2002 to 2006), about 133 franchises, or 13.3 percent, were terminated — a percentage the report said was extremely low since the failure rate for most start-up businesses is between 80 percent and 90 percent.