By Aissatou Sidime, San Antonio Express-News Knight Ridder/Tribune Business News
Oct. 22--Farmers agent Nick Martinez is working harder than he ever has since he started his insurance agency 19 years ago. Late evenings and even Sundays, he's in the office calling customers to try to convince them to give him a chance to find them new homeowner's insurance.
His wife, Irene, a retired Southwestern Bell employee, has been drafted to help.
'I try to explain that we cannot all drive Mercedes policies any more. We now have to back down to Cadillacs,' the Olmos Park agent said.
Still, he's losing customers.
Roughly 4,000 insurance agents statewide who agreed to sell Farmers insurance are facing a decision about how to survive as Farmers Insurance Group prepares to cease writing homeowner's policies in Texas next month.
Farmers made the decision because of a dispute with the state about price regulations.
About 130 San Antonio Farmers agents rallied Monday at the Airport Hilton in the first of several statewide meetings scheduled this week to share ideas and call for a resolution of the insurance crisis.
'We are Farmers and you're not going to divide us,' said a sometimes teary-eyed Lee Ann Edwards, co-owner of Edwards Insurance Agency in Levelland.
The agents walk a fine line between trying to hold together their businesses and keeping Farmers happy. The company requires agents to sell its policies first. So agents usually formed relationships with other companies only if they wanted to sell health insurance or commercial insurance that Farmers didn't offer.
Many now have no other options for homeowner's insurance.
The typical agent earns between 40 percent and 65 percent of her income from commissions on Farmers homeowner's insurance policies. But when a customer cancels a policy before it expires, the agent must pay back a prorated portion of the commission she earned when she sold it.
Several agents have reported rising paybacks since last month as more and more worried Farmers customers cancel their policies early. It's difficult convincing customers to stay.
Agents say although they aren't Farmers employees, most consumers don't see a distinction, since agents proudly advertise under the Farmers name.
For the moment they have a slight reprieve. Farmers has allowed early renewals for customers who were set to be shifted from the most comprehensive homeowner's policy, HO-B, to the amended HO-A policy by year's end. Moving up the November and December renewals is helping offset the customers who are leaving in fear.
But agents report scrambling to find coverage for other customers. Texas General recently stopped selling homeowner's insurance. Texas Select has raised its minimum deductibles.
Scottsdale, a secondary company, is selling HO-B policies -- but with several exclusions.
'I had a guy who signed a loan to buy an older home and I had to tell him I couldn't get him coverage,' Farmers agent Dan Miller said. 'As agents, you build up business over a lifetime. It hurts not to be able to serve them.'
Agents said they fear many customers will be placed with questionable companies that could hurt future business.
'We stayed with the big companies because they are reputable,' agent Kris Richter said. 'There are companies that call and cut you off in a minute. As an agent, I don't feel I can count on them, so why would I put my clients with a company I feel insecure about?'
Agents foresee lots of colleagues shuttering their doors or forgoing their prized independence and consolidating if the crisis isn't handled soon.
Frank Dunn is shifting his non-agent employees to part-time and moving to a smaller location in preparation. Richter said he has arranged for a month-to month lease on his office -- just in case.
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(c) 2002, San Antonio Express-News. Distributed by Knight Ridder/Tribune Business News.
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