Healthy diversification

Obamacare has put health insurance brokerage firms in a quandary.

The big question: Will brokers still continue to write policies for health insurance if the government takes over the market? “People don't know what's going to happen to this business,” says Bob Whitlock, who founded Southwest Florida Insurance Associates in 1992 and covers Charlotte, Collier and Lee counties.

The questions go deeper for Whitlock.

First Obamacare, combined with the recession, slashed commissions at Whitlock's firm by half (Whitlock declines to cite specific figures.) “We're crawling back out of a hole,” Whitlock says.

What's more, insurance companies that suffered losses as a result of higher health insurance claims last year aren't spending money to advertise for new customers to sign up for health insurance through brokerage firms such as Southwest Florida Insurance Associates.

Another drawback is enrollment periods have shrunk to three months. That means agents aren't busy nine months of the year because the enrollment window is closed for Obamacare and other government plans. “Our people used to write policies all year,” Whitlock says.

Despite the widely publicized premium increases and insurance failures due to Obamacare, Whitlock isn't waiting to see who gets elected next year to fix the problem. “We don't know where this is going,” he says.

So armed with a database of more than 35,000 health insurance customers he's amassed over more than two decades in business, Whitlock partnered with another insurance veteran, Josh Weaver, to sell property, casualty and other lines of insurance.

“We formed a separate company, but it's all the same people,” says Whitlock. The new company they started earlier this year is called SWFL Insurance Agency.

As open enrollment begins for Obamacare, health insurance customers may buy other kinds of insurance and compare costs. Whitlock encouraged his health insurance agents to also obtain licenses to sell property and casualty policies.

Whitlock's tenure in the market is helpful. “We've been here a long time and people know us,” says Whitlock.

Besides, diversification makes sense because customers who have more than one policy with an agency usually tend to stick with a firm longer. “It's easy to leave an agency when you've got only one policy,” Whitlock says.

Yet starting a new agency is challenging, especially signing up new carriers, Weaver says. He estimates agents have to quote five prospects to get one contract.

So far the firm has a stable of 25 companies for which it writes policies. In particular, Weaver and Whitlock see a growing market for homeowners insurance because the state has experienced fewer hurricanes lately and better-capitalized insurance companies are taking over policies from Citizens Property Insurance Corp.

In the long run, a brokerage with multiple lines of business might be more appealing to a buyer. “If we put something together as a one-stop-shop, it would be more viable to sell,” Whitlock reasons.

Follow Jean Gruss on Twitter @JeanGruss