Immigration reform has ramifications for agents
Legislation could broaden the market for auto, HO and other products
By Sue R.A. Honeyman
For years, immigration reform has been an on-again, off-again front-burner issue in the halls of Congress and at the White House. It bubbled up again this summer, even giving rise to the longest Senate speech in a foreign language—14 minutes in Spanish to support the comprehensive reform legislation—by Sen. Tim Kaine (D-Va.), who learned the language as a volunteer in Honduras.
As this issue goes to press, many of the estimated 11 million undocumented residents currently in the United States and others who hope to move here legally are watching Congress, hoping for legislative action that will change their status and dramatically improve their lives.
They are not alone.
Many in the insurance world—particularly those agents who sell cross-border insurance, work with immigrant clients or see value in expanding their markets—also are carefully watching this unfold. A bill similar to the one the Senate passed this spring would provide a great business opportunity for them.
In the Southwest, cross-border insurance broker Jim Labelle, International Insurance Group, has followed every development because his products can be sold only to U.S. or Canadian citizens or other residents who have legal travel documents such as a Green Card (see sidebar). In the Northeast, Kathryn Soderberg, CPCU, president of Soderberg Insurance Services, Inc., Lynnfield, Massachusetts, who has built up her agency's Hispanic-client base from 15% or 20% to more than 35% over the past nine years, anticipates many changes should a comprehensive bill be passed.
Right now, the process of doing business with recent immigrants and foreign nationals is especially complicated by a hodgepodge of state and federal laws that reflect different visions of security needs, humanitarian obligations, the nation's character and the future.
"It's difficult to get insurance in Massachusetts, if you are not here legitimately," says Soderberg. "You can get auto coverage for a year by showing a foreign license, but companies usually will not renew you (at expiration) if you haven't gotten a Massachusetts license by then." And, as every agent knows, the first year of insurance is a loss leader, since you lose money on an account that remains less than three years, she adds.
Soderberg typically does business with her Hispanic clients face-to-face and in Spanish, as they prefer, and gets most of this business by referral. If they are seasoned drivers, she will ask them to get proof of their driving record from their home country to avoid a costly new-driver rating. Once they realize the premium might be half as expensive if they can document a good driving history, they usually get the documents they need. She was particularly impressed by a client from Ethiopia, who secured such a letter and got a large, retroactive premium reduction.
Just south of Massachusetts, in Connecticut, though, a new law will make it possible for approximately 54,000 undocumented immigrants to obtain driver's licenses and thus get insurance, starting in 2015. Democratic Gov. Dannel Malloy touted the law's ability to improve public safety in a statement that said: "It's about knowing who is driving on our roads and doing everything we can to make sure those drivers are safe and that they're operating registered, insured vehicles."
Connecticut isn't alone. Maryland, Illinois and Oregon adopted similar legislation this year, while driver's licenses have been available to non-U.S. citizens residing in New Mexico, Washington and Utah.
Back in Massachusetts, Soderberg said buying a home is very difficult for the undocumented because banks usually require proof of permanent residence or a Green Card before they'll underwrite a mortgage, but she was able to provide condo coverage for a woman who had just bought an $80,000 condo for cash. This woman was not a legal resident, but she had a Social Security number and was legitimately paying taxes. Rental insurance is not a problem, since the Massachusetts FAIR plan accepts everyone.
Though many are concerned about the use of fraudulent identity documents, these are often the only way for noncitizens to support themselves and their families in the United States. An independent contractor cannot get work without showing proof of insurance, but they need a tax identification number to buy workers compensation, Soderberg says.
"The documented and undocumented contribute so much to the economy," she says. "They still believe in the American dream and are not afraid to take risks." And they are loyal, appreciative customers, even bringing her gifts at Christmas.
Soderberg, a former Spanish teacher, sought out this niche after the greater Boston area experienced an influx of Salvadoran and Dominican immigrants. In fact, three years ago Telemundo, the Spanish-language television station, estimated that Dominicans were more than 21% of the population in the Greater Boston area.
Despite her success in marketing to the Hispanic community, though, Soderberg says she will need to carefully manage growth in this niche if a comprehensive immigration-reform bill is passed. She also insists her staff speak to clients in their native language but in English to each other. The agency her family started has always been a traditional New England insurance agency serving the needs of the broad community, and she wants her core English-speaking customer to feel comfortable doing business there. In other words, English—as well as Spanish and any other needed languages—will always be spoken there.
Insurance to cross the border
The U.S. shares borders with two countries. Driving into Canada is a snap as you need only present your passport. Travel between Mexico and the United States is another matter. Whether its a family spending a weekend at the beach in Sonora, snowbirds driving their RVs from Montreal to Mexico for a six-month stay, or a Mexican visiting family in the United States, or a U.S. Green Card holder visiting family in Mexico, they need special cross-border motor vehicle insurance. Twenty years ago, the pathway to the border was lined with roadside stands that sold this insurance to travelers. Buying insurance this way not only added extra time to the trip, it gave travelers no opportunity to research what they were buying. Consequently, they might be paying too much or buying from a questionable agent or carrier, says Jim Labelle, CEO, International Insurance Group, Inc., in Flagstaff, Arizona, a brokerage and managing general agency for cross-border auto insurance. Labelle and his wife, Andrea, were both working at a large insurance agency in the Arizona capital when they noticed that many of their clients would come in seeking weekend insurance for a trip to Mexico. His wife would have to stop what she was doing and type out a Mexican Auto Policy, which took a lot of time for a small premium. They decided this process could easily be automated, and created IIG, which today employs 20. The brokerage works with about seven Mexican-domiciled insurers—including A- rated GNP Grupo Nacional Provincial and Aba Seguros—and about seven U.S. insurers—including Infinity Insurance and Farmers Bristol West—to provide auto, homeowners and watercraft insurance and even roadside assistance. The coverage is sold by about 4,000 subagents, primarily in Texas and California, but also in Iowa, Illinois and other places. It's also sold by a number of U.S. insurers that have formal referral agreements with IIG to place their insureds' coverage in Mexico, when needed, he says. About 25% of Labelle's business involves Anglo visitors who pay $10 to $20 a day for auto coverage, depending on the value of the vehicle. Drivers are not underwritten. Another 25% are snowbirds who buy six-month auto and sometimes home policies that are fully underwritten. Annual auto coverage is slightly lower than U.S. premiums—usually about $500—because they do less driving, while homeowners and condo policies are almost the same as those sold here. "The remainder are Hispanics from all over the U.S. who drive back to Mexico several times a year to visit friends and family," says Labelle. You can't cross the border unless you are legally documented, so most have U.S. citizenship and a few have Green Cards, he adds. That's where immigration reform enters the picture. A new law that provides provisional immigrant status allowing those currently undocumented to work legally, obtain a Social Security number, start building credit, get a driver's license and travel outside the United States for up to six months a year would give these people the freedom and resources to return to Mexico to visit family or to work, Labelle says. And that would mean a huge jump in demand for cross-border insurance business, he adds.
The author
Susan R.A. Honeyman is a freelance writer based in New Haven and vice president of Word Hive Communications LLC.