Departure of Insurer from Florida Points Up Fraud Problem

With a letter sent out a few weeks ago, Explorer Insurance announced that it will no longer write private automobile policies in Florida because there is too much fraud.

"The company is taking this action in light of poor ongoing business results in Florida, particularly in the area of private passenger automobile no-fault coverage, in which loss fraud has been rampant with no signs of abatement," Explorer vice president, Steve Frisina, said in the letter to Florida's Office of Insurance Regulation.

The letter said Explorer intends to send termination notices to agents who sell its coverage within a week of the Office's acceptance of its plan. Policy holders will begin receiving non-renewal notices also within one week. And, by January 2012, no Explorer policies will remain in effect.

The Office has deferred accepting Explorer's plan for the time being present, until the company can fix some of the details of its exit.

In the meantime, however, Explorer has severely restricted the number of policies its agents are allowed to write and has told agents it is no longer paying commissions as of this week, according to a Tampa agent.

"They were going to be over $100,000 in premiums for us this year," said John Guthrie, of the John Guthrie Agency, Tampa. He has had severe restrictions on the number of policies he can write for Explorer since May.

Guthrie said that fraud is a big problem that is chasing many auto insurance carriers out of the market. Last year at this time, his agency represented 16 or 17 carriers, he said. Now the agency is down to three.

"The companies are all just pulling out or they are making underwriting so restrictive that you can't get the people through the approval," he said.

In May, the National Insurance Crime Bureau released a report that said that Florida has led the nation in suspected staged auto accidents the last three years in a row. According to the report, Florida had 3,006 suspicious claims from 2007 to 2009, and that was almost twice as many as the two states with the next most suspicious claims, New York and California.

The worst place in Florida was Tampa, the report said. Previously the worst place had been Miami and South Florida. But, in 2009, there were 487 questionable claims related to staged accidents in Tampa, while there were only 258 such claims in Miami.

Guthrie said he and some of his fellow agents in Tampa's Hillsborough County have gotten so frustrated by the situation, and by the lack of government action to crack down, that they have begun collecting petition signatures from new policy and renewal clients and forwarding that petition on to the Department of Financial Services, which houses the Division of Insurance Fraud.

"They need to do something about this fraud," he said.

Jack McDermott, a spokesperson from the Office of Insurance Regulation, said that fraud was not the responsibility of his agency so they do not know much about it. But "We have heard, anecdotally, from other companies that they have been having trouble with fraud," he said.

Explorer, which is based in Santa Clarita, Calif., is a member company of the ICW Group, San Diego. Until now, it has sold automobile policies only in California and Florida.

As of the end of July, the company had 16,576, in-force policies in the private passenger automobile insurance line in Florida, with direct written premiums of $16.1 million and a loss ratio of 124.2.

Eileen Beaudette, an agent in Naples who has been an Explorer representative, said that in her area fraud and staged crashes are not a big problem and she has not had carriers stop writing. But she has been aware that it is a big problem in Tampa and on the east coast of the state.

"We've been lucky," said Beaudette, of A Auto Buyers Insurance. "We still have a lot of carriers writing."

Beaudette said that Explorer was never a very big part of her agency's business because their rates were not very good.