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Insurance agents having to consider life after State Farm

As the company leaves the Florida property insurance market, a generation of agents who once aspired to sell policies for the firm are moving on to other options.
By David Bauerlein

Working side by side with his father, Matt Carlucci Jr. aspired to become a third-generation State Farm agent. 

His grandfather Joe Carlucci – a Jacksonville city councilman and state senator – had started the family’s association with State Farm back in 1962. His father, Matt Carlucci, who also served on the City Council, then took the torch by being a State Farm agent. Matt Carlucci Jr. worked with his dad at the State Farm agency in the San Marco neighborhood.

But after State Farm’s seismic announcement in February that it would exit Florida’s property insurance market over a two-year period, Matt Carlucci Jr. went down a different path. In April, he joined his brother and mother in opening a Brightway Insurance agency. It wasn’t an easy adjustment.

"To be honest, when I first started out here, I’d pick up the phone and have to catch myself from saying, ’Matt Carlucci, State Farm,’" he said.

His decision reflects how the upheaval in Florida’s property insurance market, triggered by the massive destruction of hurricane strikes, has forced people to alter their career paths.

State Farm Florida is the state’s biggest private property insurer. It counts about 68,000 policies in Duval County, the second-largest number of customers for any county in Florida, and dozens of agents across Northeast Florida.

But State Farm’s network of agents is shrinking. In January 2008, State Farm had 883 agents statewide. The same year, State Farm stopped writing new property insurance policies in Florida, which limited agents to existing customers for that line of coverage. By January 2009, the number of agents had dropped to 824. Today, it’s down to 802, about a 10 percent drop since 2008.

State Farm agents had optimistically taken a wait-and-see approach after the Legislature approved a bill that would let some insurance companies, including State Farm, raise rates without getting approval from state regulators.

State Farm said it might reconsider withdrawing from Florida because the bill would give consumers more options and strengthen the property insurance market. Gov. Charlie Crist vetoed the bill Wednesday, saying it would lead to "significant and unpredictable rate increases" while putting newer, homegrown Florida insurance companies at a disadvantage.

After the veto, State Farm said it would move forward with its withdrawal plan, which still is subject to approval by the state Office of Insurance Regulation.

State Farm remains a force in automobile insurance with a state-leading 2.7 million policies. But property insurance can account for 40 percent to 50 percent of an agent’s business, and customers often purchased their home and auto insurance in a package.

The state Office of Insurance Regulation wanted State Farm to let its agents write new property insurance policies sold by other companies. State Farm has balked at the condition. Instead, the company has discussed an arrangement in which existing customers could switch to different insurance carriers and State Farm agents would service the policies for a fee, thereby remaining the point of contact for customers.

Effect on State Farm agents

After the Office of Insurance Regulation approves a withdrawal plan, State Farm will have a better idea about how agents will be effected, said Chris Neal, public affairs manager for the company in Florida.

State Farm agents are independent contractors. Like any small business owner, the agents must make enough to cover their payroll and overhead expenses. To get a coveted contract to sell State Farm products, prospective agents go through an application process including interviews. Those that make the cut go into an "agent pool" for further training, then wait for State Farm to tap them.

In 2008, State Farm stopped awarding contracts to new agents in Florida. Neal said it would have hurt both new and existing agents to authorize those start-ups at the same time State Farm has pulled back from property insurance in the state.

The Carluccis aren’t the only family where the children of longtime agents have adjusted to the new insurance landscape.

J.R. McCann also has two generations of State Farm legacy, with both his grandfather and his father Ron McCann being agents in the Jacksonville area. J.R. McCann is among those who are leaving Florida to start their own State Farm agency. He’ll open in August in Waycross, Ga.

"My goal, no matter what, was to become a State Farm agent," he said. "I’ve found that really this was the best thing that could happen in my business career."

Chris Cotter took a different tack. He worked for years at the State Farm office of his father, Bill Cotter. After State Farm made its withdrawal announcement, Bill Cotter decided it was time to retire. In March, he closed the State Farm office, located on Old St. Augustine Road in Mandarin. In May, Chris Cotter opened Cotter Insurance at the same spot.

Changes in insurance

The Cotters said State Farm remains a good company but in Florida, the threat of hurricanes is making it impossible for any single company to control market share the way State Farm has. Chris Cotter said becoming an independent agent gives customers a one-stop shopping experience for buying coverage from different insurance companies.

"State Farm is the last horse in that race," he said. "The day of one insurance company doing everything is gone, in my opinion."

Matt Carlucci Jr. went with Brightway Insurance, a Jacksonville-based network, for a similar reason. He said it gives him the ability to write the entire gamut of coverage – automobile, homeowner and businesses policies.

"I really like State Farm and think it’s a great company," he said. "But the reason I made the decision I made is I want to be able to write all the lines of insurance."

His Brightway Agency is located on Hendricks Avenue, two blocks from Matt Carlucci Sr.’s State Farm agency. They are competitors and to some extent allies. Carlucci Sr. said he’s always referred customers he couldn’t help to other insurance agencies around town, and now, he puts the Brightway agency on his list of suggestions.

He said ultimately, it’s up to his sons to build the business. He plans to stick with State Farm until he retires. He noted some of his longtime clients have family connections dating back 47 years when his father signed them up as State Farm customers.

He said Crist’s veto was a setback but he remains confident State Farm will put in place an arrangement for existing customers to continue using their State Farm agents.

"State Farm agents are some of the best in the business and they are a very resilient group," he said. "Is this [the veto] good news for State Farm agents? No. But we will continue on as agents, and that’s what I will do.", (904) 359-4581