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Big I New York has asked Kemper Auto & Home to delay its announced commission reductions on certain auto insurance policies. The carrier was told in a meeting this week that the suddenness of its move is unreasonable and bad for its independent agents. The carrier informed many of its New York agencies this week that it is reducing the commission rate on its Kemper PrimeSM personal auto insurance product to an extremely low level. The change will take effect on June 1, 2022. Several Big I New York members contacted our office to ask whether the carrier's action is legal. We have concluded that it is, for two reasons: - New York insurance law regulates carrier commission reductions only in situations where the carrier has terminated an agency's contract. For any
personal lines policies that the law requires the carrier to continue, the carrier must pay the prevailing commission rate in effect at the time of the termination. For
commercial lines, the carrier must pay the commission rate applicable to that agent at the time of the termination. New York law does not regulate commission changes in other situations.
- A review of the carrier's agency contract indicates that it gives the carrier the right to change the commission schedule at any time in compliance with applicable state law.
While it appears that the carrier has the legal right to take this action with little advance notice, Big I New York President and CEO Lisa Lounsbury met with carrier representatives on May 19 to register strong objections. They explained that the carrier took the action after unsuccessfully seeking rate relief from state regulators. During frank remarks, Lounsbury stressed the unfairness of giving agencies little more than two weeks' advance notice of such a large reduction. She asked them to consider delaying implementation to dates further into the summer. Their response was noncommittal. She had a subsequent conversation with Bob Otis, the carrier's president of personal insurance, on May 20 with the same result.
As of this writing, we suggest that members who represent this carrier: - Assume the announced reduction will take effect on schedule,
- Respond in the best interests of their clients and their businesses, and
- Contact their Kemper Auto & Home marketing representatives to explain the impact this change will have on their agencies
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