Depopulation Updates and an Agent’s Perspective

The final phase of the first round of TWIA’s Assumption Reinsurance Depopulation Program (Assumption Program) is drawing to a close, and policies selected for depopulation that are not opted out of the program on or before May 31, 2017 will be assumed by the new carriers on June 1, 2017.

The Assumption Program, authorized by the Texas Legislature in 2015, is an annual process where participating insurers make offers on large numbers of TWIA’s policies. The program is designed to provide TWIA policyholders with alternative options for wind and hail insurance in the private market.

The 2017-2018 Assumption Program, approved by the Texas Department of Insurance in April, is already underway with five carrier companies beginning the process to participate in the program.

Agent Garry Kaufman of Galveston Insurance Associates, shared his take on the depopulation programs earlier this year.

Depopulation: An Agent’s Perspective

By Garry Kaufman, Galveston Insurance Associates

I have been an independent agent on Galveston Island since 1995, and my agency is the oldest in Galveston County and has been in continuous operation for more than 125 years. We have been writing insurance with TWIA since it was created by the Legislature in 1971. In addition to dealing firsthand with everything that has transpired with TWIA over the past 22 years, I also served on the TWIA Board of Directors for 13 years, was Chairman in 2008 when Ike hit, and I am a current member on the TWIA Agent Advisory Group (AAG).

TWIA in Galveston is more than just an “insurer of last resort.” For most residents and businesses here, purely by the nature of where we are, TWIA is the insurer of only resort. That is why I am especially invested in the depopulation (depop) efforts.

I have had a front row seat for depop as an agent on the coast and via my participation in the AAG. I have worked with and accepted offers through both programs. Here are the definitions of both programs and my experiences and thoughts on the whole deal.

Voluntary Market Depopulation lets participating insurers make offers on TWIA policies one at a time at policy renewal.

Assumption Reinsurance Depopulation lets participating insurers make offers on large numbers of TWIA policies. If policyholders take no action, their policy will automatically be transferred to the depop insurer.

My take on depop
In 2015, the Texas Legislature authorized the creation of the two depopulation programs with the goal of providing coastal policyholders alternate options for wind and hail coverage in the private market. The goal of depop is a good one, but as all coastal agents know, changes like this create a heavier workload for us on top of an already labor-intensive process.

The first time I heard about depopulation my first concern was for my clients and the impact of going to a new insurer. As their agent, it is my job to act in their best interest and think through any risks switching to a new insurer could present.

Company Information and Vetting
I voiced my concern that we as agents were not provided with much information or time to research these depop insurer companies. How do we properly vet them? Many were not A.M. Best rated and most were not located in Texas. Those concerns extend to the depop insurers’ ability to handle our client’s claims in a fair and timely manner. I have confidence in TWIA’s claims handling abilities and hope not to test any of these new companies but I doubt they have ever had to adjust a claim having to consider WPI-8s and other Texas coastal issues. That makes me nervous. How do we know if we are walking into a situation with a company that may not have the capabilities to handle hurricane-volume claims in our state?

TWIA listened to my and other AAG’s member’s concerns, and responded by creating these depop webpages for us to access information about the programs and the companies. They sent regular agent blasts to communicate processes and changes, hosted webinars, and provided a dedicated depopulation email address for inquiries.

Eligibility and WPI8s
Another concern of mine is eligibility if a client decides to go to a depop insurer and then leave to come back to TWIA. Will the other company hold them to the same standards that TDI and TWIA have to? If not, they may no longer comply with the Association’s eligibility requirements. What then?

What I like about the Assumption Depop program, is that I can look at the offers made by depop insurers on a case-by-case basis and decide which policies would benefit from a transfer.  Even if I accepted the offer from the insurer on behalf of my client, my client still has the option of opting out of the process and remaining with TWIA if they desire.

My stance on depop right now
Even with my reservations about the depop program and process, my agency has participated in both programs. After this pilot year, I will see how the process works out for my clients and we may accept even more offers in next year’s program.

The bottom line is that I am encouraged by depop because it means more private market insurers are willing to write insurance on the coast, and having more options for our clients is always a good thing. I encourage you to carefully consider and weigh the pros and cons of offers made on your policies in both programs, and make the choices that you feel are right for your clients and their individual needs. After all, isn’t that what we are here for?