January Insurance Board Meeting
Memberships through January are 4025 behind last year at this same time. 107 agencies have less than 1% growth. 94 of 170 agencies will get some type of loss ratio bonus.
Reserves: January 2012 surplus = $840 million, December 31, 2012 surplus = $928 million.
Reinsurance has been purchased for 2013 at a cost of $90 million. 2012, with the repurchase of reinsurance after the March storms, the cost was over $90 million.
John Sparrow has been named company COO (Chief Operating Officer).
In auto, it looks like 61 of 170 agencies will get an auto bonus, totaling $384,800.
Jeff Koch spoke on increases and retention. It is still their belief that raising deductibles will mitigate the increases and help save business. On a good note, claims under $500 will no longer count against our clients in the predictive model. The company is going back to January 1, 2013 to correct this. In the west, that means food spoilage claims from the ice storm won’t count against them. Sometimes the steady pressure of agents for the benefit of their clients pays off.
Some interesting data: It was reported that in 2012, the company paid out $20,460,000 – 8% of our total property losses were due to water claims. Deer claims were a significant portion of total auto claims.
EARTHQUAKE
• Tenessee, Arkansas, Mississippi, Oklahoma, Virginia, and Alabama already have placed their earthquake insurance through Argenia. To no ones surprise, Kentucky Farm Bureau voted by the board to get totally of the earthquake exposure in 2 years.
• This will start with new business in the last quarter of 2013.
• Agents will receive 10% commission through agency, meaning the agency will also receive a commission.
• The agents will get NO buyout on (existing earthquake business?).
• The state is divided from west to east. A map displayed three regions, Critical (west KY), High (west KY), Moderate (central KY), Less (east KY).
• Rates for these regions will be 450%, 350%, 327%, and 247% higher than current earthquakes rate respectively.
• The new policy will need to be examined because the deductible will apply differently to different coverages.
• It has been approved that the company is going to roll out Argenia on new business and they are going to start in the East and go West.
Personal observation:
1. There is less earthquake sold in the east so they can work out the kinks.
2. There is less earthquake sold going east to west, so when the company does roll out Argenia in the west, and new business comes to a halt, it will be too late.
The company’s view is that when clients are explained what the earthquake deductibles are to our clients that many of them will not want to carry the coverage anymore. Personally, I feel that from Bowling Green west, 90% of all property has earthquake coverage and I don’t believe many will drop the coverage. They will first shop.
It is also worth noting that the motion and second to eliminate the earthquake coverage came from board members who have few members who would be affected by this change in direction by the company.
KFB discussed lower premiums with Argenia which was declined. I asked that for right now, the company should consider giving a discount to existing policy holders to reduce the shock of this transition. Mr. Smith said that they have discussed BUT determined that they didn’t want to put Farm Bureau money towards another company.
See you next month!!
Mickey Sirls
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