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Katrina impact on industry will take years to play out

Insurance agents have traditionally been some of the most respected business people around, particularly in small towns. But in the post-Katrina mayhem with many people complaining about slow or no payment on claims, and fights between different insurers about whether damage was from wind or water, how is the reputation of insurance agents holding up?

“There were a lot of people angry about flood insurance, but we reminded them we had mailed them postcards over the years asking them to take out flood insurance even though they were not in the flood zone,” said Tom Reynolds, Tom Reynolds Insurance Agency Inc., Ocean Springs, who has been an Allstate Insurance agent for 41 years. “Most of them recalled the post cards, and most had elected not to take flood insurance because they used Camille as a benchmark. Also, every homeowner policy mailed out dedicated a full sheet to tell our insurers, ‘You don’t have flood insurance and although you are not in a flood zone, you should talk to your agent about your needs.’”

Reynolds was able to identify with his policy holders because he was like so many others: he left a home before Katrina and came back to a slab.

“Our home was completely gone,” Reynolds said. “Although I was overwhelmed, we were open by Tuesday after the storm and stayed open seven days a week thereafter for seven months to cry over our losses with our customers and try to work them through it. We had a lot of support from our claims department, but we were involved ourselves on a one-to-one basis when someone felt they needed my help with their claims.”

The future of insurance in Mississippi is a big question mark at present, and some consider it a major stumbling block to recovery. Currently, Sen. Trent Lott (R-Miss.) and others are in favor of national catastrophe insurance so that home and business owners could have one policy that would cover all perils. That would eliminate fighting over whether it was wind or flood damage.

“I feel the federal legislation being considered will help address the problem and make normal losses more affordable to my insurers,” Reynolds said. “The greatest impact we are having is being able to write new policies right now. We want to help protect families, homes and businesses. But until we get some programs worked out, the future of the homeowner market is leaning towards the wind pool for hurricane losses in the bottom six counties.”

Making a distinction

Debbie Shempert, an agent with Renasant Insurance in Tupelo who is president of Independent Agents Association of Mississippi, said the industry as a whole has taken a hit as a result of Katrina. But her perception is that most people who have had problems getting claims paid don’t blame their agent.

“Most people can distinguish between their agency and their agent,” Shempert said. “Companies know they weren’t geared up to respond as quickly as they should have. People understood it wasn’t their agent who was not responding. Nine times out of 10, the agent lost everything, too, but put up makeshift signs and sat out there to take claims. The industry took a reputation hit, but the companies are aware of that and are trying to make changes so they can be there in the event that we have a catastrophe this size again. The companies can’t keep a large number of adjusters on staff all the time, but they are taking steps to respond sooner.”

Shempert said evidence of the ire of policyholders being directed against companies and not individual insurance agents is that few people have filed lawsuits against their agents. “Some have brought lawsuits against their agency, but few have sued their agents,” she said.

The impacts to the insurance market from Katrina are not just being felt in the coastal counties.

“We are definitely seeing the effects from Katrina in the personal lines market,” said Keith Bills, owner of Bills Insurance Agency in Grenada and president-elect of the Independent Agents Association of Mississippi. “We are seeing tightening in the market. The worst is yet to come. It will probably be six months to a year from now when the rates will start to reflect an increase from the Katrina losses. That is due to the reinsurance market, and the companies are only now experiencing increased reinsurance from Katrina.

“This is the worst natural disaster we have ever had, so no one knows how it will affect the industry yet. My opinion is it will increase costs for consumers in the next year and a half to two years or longer. Really, until we know what kind of increase the wind pool is going to receive, we won’t really know how it will affect the markets on the Coast or on a statewide basis.”

Despite the challenges, Bills remains bullish on the insurance industry. He believes it is still a good career path for young people. A graduate of the insurance program at Ole Miss, now rated as one of the top five insurance programs in the country, he highly recommends a college education for people who want to enter the industry. In addition to Ole Miss, Mississippi State University (MSU) also has a well regarded insurance program in the school of business, Bills said.

After graduation, instead of immediately going into starting an agency, Bills recommends getting experience first. After he graduated, he got a job as an insurance underwriter with Farm Bureau in Jackson. After two years, he moved back to Grenada and joined the insurance agency his father started in 1975. After his father passed away in 1987, he purchased the family agency. Since that time, it has grown.

“At the time my dad opened this agency in 1975, there were nine independent insurance agencies in Grenada,” Bills said. “Now there is only one locally-owned agency left. I bought two of the largest agencies in the past four years.”

High demand

Shempert, who has been an independent agent now for 20 years, started out in the industry as a commercial customer representative. Now she is a senior vice president and operations manager.

“I have done it all through the years,” she said.

Shempert said this is a good career path to consider especially considering job security. Demand is so high that it is difficult to hire experienced people.

“Once an agency has someone trained, they don’t leave,” Shempert said. “It is real good job security. I have had people move from Tupelo to the Coast, and they didn’t have any trouble getting a job. If you have a background at an independent agency, most of the time you don’t have trouble moving to a new place. That is because so hard to find people with experience.”

In order to receive a license in Mississippi, you must attend a three-day agent’s license review course and test over 70% on an exam. Shempert, who teaches the license review course, advises someone interested in an insurance career get the license and then send out resumes.

Obviously, someone with a college degree would get preference. But Shempert sees many people past the traditional college age interested in working in the industry. She said if they have the right personality and work ethic, they are worth the time invested in on-the-job training.

Someone with six or seven years experience would be even more attractive than a college graduate. But Shempert said that is just too hard to find.

“People who have experience get begged to come back even after they retire because it is so hard to find experienced people,” Shempert said. “I know one woman who has been begged out of retirement two or three times.”

Susan Lamey, public affairs specialist with State Farm Insurance, says State Farm looks for employees who have an entrepreneurial spirit. “Our agents are small business entrepreneurs, independent contractor agents and vital members of their communities, who have control over their time and income and have the backing of a financially-sound company,” Lamey said. “Agents are provided support and training at the start of their internship and throughout their agency career.”

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

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