The Florida Association of Agents makes a large investment in the start-up insurer

The Florida Association of Insurance Agents, the state’s largest agent group, has taken the unprecedented step of investing in an insurance startup, a move designed to help keep agents in the game and bring in more capacity in the Florida market.

Officials would not disclose the dollar amount of the investment, but executives at FAIA and Sypher Insurance, the technology-heavy homeowners mutual insurer that plans to launch later this year, called it “impactful” and “significant.” . FAIA will be a small investor in Sypher, which aims to raise at least $35 million before the November launch date.

“Overall, I think it’s a good thing,” said Rob Norberg, owner of Arden Insurance Associates, an agency in Lantana, Florida.

State and national industry leaders said they had not heard of agents or agency groups investing in a trucking company anywhere in the U.S. but in Florida, a market still grappling with heavy loss spending, rising prices and many exits. operators in recent years. it made sense for the 2,000-member FAIA to take matters into its own hands, said Kyle Ulrich, the association’s president.

Ulrich

“Our mission at the association is to promote the growth and perpetuation of independent agents,” Ulrich said this week. “If there are companies committed to that distribution channel, then we need to help them do that.”

In fact, the association’s board of directors has been considering such a partnership for the past few years and has met with a number of companies. It was only in recent weeks that Sypher approached the FAIA leadership, and then made an appearance on the board.

“There was a lot of vetting, a lot of meetings, a lot of questions, but in the end, they said, ‘absolutely, this is a game changer and we’d love to get behind you,'” Crystal McInnis, chief. revenue officer for Sypher, said in an interview with Insurance Journal.

McInnis and other Orlando-based Sypher executives are well-known to FAIA members and the Florida insurance world. Sypher has made a name for himself as a reinsurance advisor and consultant, providing coverage for a variety of companies in Florida. Prior to founding Sypher, company CEO Subhashish Dutta co-founded Gemini Re, an insurance-linked securities asset management firm, and was managing director and head of R&D at Guy Carpenter.

Katelyn Elsemiller, director of underwriting for Sypher, and Laura Johnson, chief product and underwriting officer, were both with Olympus Insurance in Florida for several years.

Duta

Unlike other recent Florida startups, Sypher doesn’t plan to build its book on acquisitions from Citizens Property Insurance Corp. That may come as a relief to some agents, who have said buyouts can be cumbersome and time-consuming to write new business, especially when policyholders don’t agree to the change.

Sypher’s approach will be organic growth, with a goal of 20,000 policies in force in the first year, Johnson and McInnis said.

And while the company will keep human agents at the core of their business, it will also rely heavily on artificial intelligence and machine learning, from quotes and liabilities, to claims handling and underwriting – and knowing which coverages to avoid. , said Dutta. Machine learning, combined with human oversight, will also be used to produce communications with stakeholders, he noted.

Sypher will also be focused on a wide range of data points to improve outcomes, including measuring adjuster performance, finding bad actors and defining the claims lifecycle.

“The industry is two steps behind in identifying the loss trends that are really affecting things,” McInnis noted. “With data and machine learning we’re hoping to see, in real time, what are the outliers? Is something an anomaly or is it becoming a trend?”

The mutual agreement has no plans to require binding arbitration to resolve claims disputes, as some Florida carriers have included in the policies in the past two years. But officials would not be specific about how specific or broad Sypher’s policy umbrella endorsements might be. Some Florida carriers have tightened roof approvals in recent years, excluding coverage for roofs older than 10 years.

Another key question is how many agents will be named with Sypher. McInnis and Dutta said the company will move slowly with appointments, but will allocate a certain amount of capacity to FAIA for its IMS market access program for agents.

“We want to add agents as we go and slowly build the final force instead of running out of capacity in three months, which you often see with startups,” noted McInnis.

McInnis

The Sypher news came days before the Florida Office of Insurance Regulation released a bulletin noting that things are looking up in Florida’s long-stressed market, with eight new property/casualty companies approved in 18 the last few months.

But Norberg, the owner of the south Florida agency, noted that not all of those companies offer open writing to agents, which limits their ability to reach the thousands of homeowners who need help.

“You have to have open writing to really turn us into a good, competitive market,” he said.

FAIA’s investment in Sypher apparently did not arise out of a sense of desperation for insurance agents losing their livelihoods to direct distribution, online quoting and automation. The number of insurance agents in Florida has grown significantly, from 33,360 in 2020 to more than 39,430 in 2022, the U.S. Bureau of Labor Statistics reports.

Agency executives and Sypher executives argue that agents offer a better way to distribute products, improve sales and vet properties. And greater capacity in the tight Florida market is key to agent growth.

“There is no greater need for our members right now than capacity in Florida,” Ulrich said.

Sypher, a play on words that suggests the company is “cracking the code” of Florida’s tough market, hopes to file for a certificate of authority in the coming months. The firm plans to have all approvals and fundraising in place by the fourth quarter of this year, Dutta noted.

This will come at the end of what is expected to be a busy hurricane season and almost two years after Florida lawmakers passed sweeping reforms designed to limit runaway claims litigation and fraudulent roofing claims, which some insurers have blamed for the destruction of their profit margins. When asked if further legislation is needed to right the ship in Florida, Johnson, Sypher’s chief product officer, said: “Let the legislation take its course. We don’t need regulation upon regulation upon regulation. The legislature did something super meaningful. Let it work.”

Other potential entrants in Florida are raising money at the same time as Sypher. Anchor Property & Casualty Insurance Co., which entered a regular runoff in 2020, is planning to re-emerge this year. Although a date has not been set, all the pieces appear to be in place for a launch sometime before the end of the year, CEO John Rollins said this week.

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