Twenty years after Hurricane Andrew battered southern Florida, independent agents are taking on a greater role to help consumers navigate property coverage options in a transformed market, an industry analyst says.

The significance of Andrew, whose 20th anniversary is tomorrow, extends beyond its rank as the second-costliest U.S. hurricane. The storm’s destruction in Florida and Louisiana prompted changes that have redefined the coastal property-casualty market, according to Lynne McChristian, Florida representative for the Insurance Information Institute.

“What Andrew did is let, not only Florida, but the nation know how seriously underestimated the amount of damage could be in a catastrophic storm,” she says.

Insurers are now managing coastal risks more carefully with the use of more sophisticated catastrophe models and a greater reliance on reinsurance, McChristian says. And the government plays a larger role in insuring exposures.

Many coastal consumers today have hurricane deductibles and live in communities with strengthened building codes designed to help properties withstand ferocious winds, she adds.

In light of these changes, McChristian says agents are helping clients to look beyond their own insurance policy to understand why their coverage is now different and more costly.

“They’re becoming better teachers, so that they can educate policyholders on what the insurance industry sees,” she adds. “They’re putting the history of Andrew into today’s context, and that’s a greater role and responsibility that independent agents have taken on.”

Still, the new reality of the property-casualty market poses challenges for agents when selecting carriers and managing errors & omissions exposures.

“We have to play the cards that have been handed to us as independent agents,” says Alex Soto, CEO of InSource, Inc. in Miami, just north of where Andrew made landfall. “We are by necessity having to do business with residual markets that we’re worried about. We’re having to do business with insurance companies that have been organized recently.”

In Florida, the state-run insurer of last resort, Citizens Property Insurance, has become the carrier of first choice for many homeowners, McChristian says.

In 2011, Citizens accounted for 23% of the state’s admitted homeowners market, according to her white paper released this month, “Hurricane Andrew and Insurance: The Enduring Impact of an Historic Storm.”

“It’s dangerous for the market to be that large because it has the potential to negatively impact the Florida economy for decades to come,” she says.

Unlike private insurers, which must have capital up front to pay claims, state-run carriers can run a deficit and tax all policyholders after a storm to cover any shortfall, she notes. Steps are being taken to reverse Citizens’ growth, but McChristian cautions the tide won’t turn overnight.

“A responsibility for agents when they write business with the state-run insurer is to let those people know that their premium that they’re paying today is not the premium they’ll be paying after a major storm because they’ll get assessed for any shortfalls that occur,” she says.

While state-operated insurance now accounts for a greater share than it did 20 years ago, private insurers represent 77% of the homeowners market, McChristian says.

Yet the composition of private offerings is now different.

When Andrew hit in 1992, nearly all Florida homeowners were covered by established insurers with national operations, according to McChristian’s paper. Companies that wrote primarily in Florida only accounted for 6% of the market.

Then in 2011, national insurers represented just 18% of the state’s homeowners market, and Florida subsidiaries of national companies handled 14%, she wrote. Meanwhile, companies doing business solely in the state held a 45% share.

“Many of those companies are well capitalized,” McChristian says. “They have the reinsurance that they need. They’re taking the steps to make sure that they’re financially positioned to pay claims when there’s a catastrophic storm.”

But Soto says the selection of insurers for agents to do business with—particularly in personal lines—is less desirable than it was before Andrew. Prior to the storm, he says his agency only worked with carriers that had an A rating from A.M. Best, but now many domestic homeowners insurers lack a rating or, in some cases, have punitive or restrictive endorsements.

“We have no alternative,” he adds.

It’s vital for agents to follow their E&O carrier’s recommendations and prepare for the potential fallout of another devastating storm, says Soto, a former Big “I” chairman. He notes agents are at risk of being sued by clients dissatisfied with their coverage and insurers could go under.

“Document, explain that you’re providing the best coverage possible,” he says. “Explain the alternatives that a client may have.”

Victoria Goff is IA online editor.