Hard market hits homeowners insurance

Rough Notes, May 2003 by Zinkewicz, Phil

MacNeill has plenty of capacity in Florida henever the property/casualty insurance industry is in the midst of a hard market, as it is today, the lines of coverage usually affected most are the more volatile liability lines-medical malpractice insurance, directors and officers, accountants and auditors liability, errors and omissions, etc. This is especially true today. The severity of losses in the medical malpractice field speaks for itself, as malpractice insurers continue to withdraw from the market. Insurers are wary of writing directors and officers liability, accountants and auditors and errors and omissions in light of the corporate scandals that have rocked the securities industry. And then, there are the tried-and-true hot spots such as environmental impairment liability and asbestos liability, which represent difficult lines even during soft markets.

However, rarely does one think of personal lines homeowners insurance as a line of business that reaches crisis proportions, even in a hard market. Of course, when the property/casualty insurance market hardens, homeowners insurance rates will go up, just as with all other lines of coverage. But homeowners insurance in a crisis situation? It just doesn't ring true.

Nevertheless, according to the National Association of Realtors (NAR), homeowners insurance is reaching crisis proportions in certain states. The NAR says that the number of "homeownerships" is on the verge of dwindling rapidly as insurers are not making homeowners insurance either available or affordable in the general marketplace. The association points to Texas and California as two states where homeowners insurance problems are particularly troublesome.

The main difficulty is potential water damage and resulting mold scares. The NAR charges that insurers, frightened off by potential mold damage, are using information obtained by credit scoring and from CLUE (Comprehensive Loss Underwriting Exchange) to redline some homeowners risks, just to avoid the potential mold exposure.

The Alliance of American Insurers (AAI) and the National Association of Mutual Insurance Companies (NAMIC) have hotly denied charges of redlining and have said that insurers have been using credit scores and CLUE for years with no problems. They say that, while homeowners rates are going up, it is the natural result of the current hard market.

Not a problem for MacNeill

That's a debate that's bound to go on for some time, but the question remains: Is there an affordability and availability crisis in the homeowners market? According to Douglas W. Bullington, president of the Florida-based MacNeill Group, Inc., "Florida's market is somewhat unique in that the ultimate capacity crisis for the consumer was solved when Florida created the FRPCJUA, now know as Citizens Property and Casualty Insurance Co. in the aftermath of Hurricane Andrew." Asked whether water damage and potential mold has become a problem in Florida, Bullington said, "No, not like in some other states and certainly not statewide. We have been watching very carefully how the mold issue has evolved in other states and we recognize that in certain places homeowners insurance may have reached crisis proportions as a result of the mold exposure. Here in Florida, carriers have recently been authorized to place limits on parts of the mold exposure."

The firm was formed as a proprietorship in 1946 by Frank R. MacNeill. The name MacNeill has been synonymous with insuring homes in the state since the company was founded as a managing general agency. Under the guidance of the company's founder, and later Malcolm G. MacNeill, the company prospered and grew, writing primarily personal property and some commercial lines business. "As the business expanded, so did the lines and companies we represented," says Bullington.

In 1989, a subsidiary of Jardine Lloyd Thompson, one of the world's largest insurance brokers, purchased MacNeill and in 1991, Thomas B. Rogan, a MacNeill employee since 1960, was appointed president. "In 1997," says Bullington, "MacNeill was awarded the distinguished designation of Certified Managing General Agent; and we are proud to be one of a select number of managing general agencies nationwide-and the first in Florida-to receive this prestigious award from the American Association of Managing General Agents (AAMGA)."

After being named president of MacNeill in 1998, Bullington was afforded the opportunity to purchase the company in June of 2000. He then renamed the company the MacNeill Group, Inc.

Bullington says, "We consider ourselves a 'traditional' MGA, in the sense that we have always operated principally in the standard admitted lines market offering our independent agents a wide range of products from a distinguished list of carriers which are fully supported by us in all areas of the process." Working primarily as managing general agents with underwriting authority for carriers represented, MacNeill produces business through more than 2,700 licensed independent property/casualty agencies throughout Florida. "We also can provide program administration services; assistance with new company formations; program/product development, including rates, forms and filings; and actuarial, statistical and analytical services," says Bullington.