Should Agents Get Paid More for Depopulating Citizens?

Office of Insurance Regulation General Counsel Belinda Miller recently asked if there is a way to reward agents for placing policies in the private market as opposed to letting them sit in Citizens year after year.

Brian Squire, chairman of the Citizens Market Accountability Advisory Committee, said that the committee has never discussed that particular idea and has no plan to adjust agent commissions at this time.

The insurer’s commission schedule was inherited from its predecessors, the Florida Windstorm Underwriting Association and Residential Property Casualty Joint Underwriting Association. Since then, Citizens has made only one change that affected commercial non-residential multi-peril policies. “We’ve had discussions over the years,” Citizens Chief Administrative Officer Susanne Murphy said recently. “But with the exception of that one change in the last 10 years, the commission rates have remained as stated.”

The current commission is set at 10 percent on personal residential multi-peril policies and personal residential policies without wind coverage. However, the effective commission is lower since agents cannot collect a commission on the portion of premium representing Citizens surcharges and state assessments. As a result, commissions on multi-peril policies are actually 7.6 percent and, without wind coverage, 9.6 percent. Agents writing a residential wind-only policy are paid 8.2 percent. The same pattern can be found in commercial policies This schedule calls for 14 percent for residential wind-only policies and commercial non-residential wind-only policies but the effective commissions are 11.5 and 11.7 percent.

By comparison, the average commission on personal lines policies in the private market is 12.55 percent and 13.56 percent on commercial lines policies.