The law does address the termination of agents when an insurer moves to end the relationship for other reasons, such as when an insurer decides to reduce its presence in the state or otherwise decrease its agent force. According to Chapter 626.471, Florida Statutes, when an insurer makes such a decision, "the appointing entity shall give at least 60 days advance written notice of its intention to terminate such an appointment to the appointee." The 60-day limit notification requirement, however, is not a hard target, but rather a default figure, since it can be altered "as provided by contract between the appointing entity and the appointee." If a contract between a carrier and agent is silent on the issue of a termination notice, the 60-day limit serves as a default limit.

An Economic Issue

Representative Greg Evers (R-Milton), along with some other House lawmakers, proposed a bill (HB 355) that would substantially change the law when it came to the termination of agents by insurers. Under the bill, except in cases where the agent had violated the insurance code, insurers would be required to give agents a 120-day notice of its intention to end its relationship with an agent. The 120-day number would be an absolute figure that could not be lowered by contract. The proposed law change would apply to all contracts enter into between agents and insurers as of July 1, 2006.

In presenting his bill, Evers cast the issue as a matter of consumer protection. He said that 60-day notice currently in the law, didn't give consumers enough time to seek other coverage options. "The current law ends the consumer's relationship with their agent and leaves them scrambling and running around looking for other coverage," he said. "It's a time-consuming process and they only have 60 days to do it."

While Evers took the position that the bill primarily is designed to assist policyholders, the underlying issue was the economic interest of agents. The Florida Association of Insurance Agents and the Florida Association of Insurance and Financial Advisors took no action in support of the bill. As independent agents they "own" their book of business. If one insurer terminates their relationship with the carrier, the agent is free to place the policyholder with another insurer the agent represents. As such, the agent retains their relationship with a client and continues to derive the economic benefits that provides. In the case of captive agents, however, it is a much different scenario.

Captive agents don't own their book of business, the ownership of which is retained by the carrier. Once an agent is officially terminated they lose the policy, which the carrier can then assign to another agent. Therefore, the agent only has an economic interest in the book of business, which represents the value of the commissions. Under certain circumstances, the agent can negotiate and contract with another agent to sell their economic interest. The insurer, however, generally must approve such sales.

The bill's primary backers were the National Association of Allstate Agents and the Specialty Agents' Association, which markets non-standard auto policies. Kari Rayborn, representing the Allstate Agents, said the bill served as a consumer protection act, which also assisted agents looking to realize the economic benefits of selling their book of business. She said that right now, Allstate gives agents 90 days notice if they are going to terminate them. However, she said, since the company has up to 60 days to approve the sell of an agent's book of business, agents really only have 30 days to find a buyer and negotiate a price. She said this put agents at an unfair disadvantage, since, in effect, agents could be facing losing some or all of their livelihood. "All the bill does is give agents a little more time to sell their economic interest," she said.

That little more time, however, loomed large when it came to carriers. Mark Delegal, representing the New York Life Insurance Company and State Farm, said that changing the law to set a mandatory 120-day notice of termination would interfere with carriers' rights to end their relationship with agents who were performing poorly. "You may have agents providing poor customer service that need replacing or agents that are bad talking to other agents," he said. "Companies should have the right to manage their business."

Florida Insurance Council representative Gary Guzzo said he had been inundated with messages from insurance companies opposed to the bill. He reminded lawmakers that most contracts between carriers and agents contained some provision addressing terminations, which generally ranged between 60 and 120 days. However, he noted, those contracts were negotiated and entered into freely by both parties. Under the bill, he also noted that right of contract would be removed. "What we are saying is don't interfere with the ability of businesses to contract with agents," he said. "Please don't allow this bill to be voted out of the substantive committee."

In response to the insurance companies' demand, lawmakers amended the bill. The bill still expands from 60 to 120 days, the amount of time a carrier must notify an agent of their intent to terminate the contract. However, that time frame is only applicable in cases where a contract between an agent and carrier is silent on when a carrier must notify an agent of the carrier's intent to terminate their appointment. The amendment, however, retains current law by allowing agents and carriers to negotiate a lesser amount of time under which an agent must be notified.