Seen in Insurance Journal:
Massachusetts insurance agents aren’t happy about the decision to introduce competitive rating into the state’s price-regulated private passenger auto insurance system. They enjoy the best market share (86 percent) in the country under the current system and don’t want to see that jeopardized. Their commissions are also protected under the current fix-and-establish system.[...]
[Frank Mancini, president and CEO of the Massachusetts Association of Insurance Agents] is worried that some smaller agencies, perhaps as many as 20 percent of agencies in the Commonwealth, might have to consider merging or even going out of business as a result of the move to a competitive system.
Well, let’s see….at the move to normalize the auto insurance market is arguably a result of a desire to increase competition and thereby generally reduce the cost of insurance overall to Massachusetts consumers. Part of the reason that there’s suspected to be some room for improvement is presumably the result of inefficiencies tolerated in the market as a result of lack of competition.
Therefore, it is natural to expect that producers who focus on auto insurance might need to look for ways to improve their efficiency if the gradual deregulation is successful in promoting competition.
It’s unfortunate for the agents…but it’s not the 1960’s anymore. Times change and businesses need to adapt.
Having said that, before fearing too much the threat of direct and internet specialists from entering the Massachusetts market….I don’t think that those changes will happen overnight. It will take time for the Mass Auto market to liberalize enough to begin to resemble the rest of the country, and to be welcoming to direct players. Thus, there’s time to adapt.
Also, don’t forget that even though direct writers don’t have to pay agents commissions, they do incur some pretty incredible staffing and marketing expenses that puts them at significantly less advantage to agency companies.
1 response so far ↓
1 Christopher Guarino // 10 Nov 2007 at 2:10 am
Nice entry, however, I feel a bit different. While it will be a new challange for us agents, the managed competition in MA will not incorporate socioeconomic factors into the rating system. This is unlike the rest of the country. Things like credits checks, educational backround and many others play a role in determining the individual rate is in other states. In MA, things will be more regulated and that will benefit the customer. Also, agencies have a great advantage in being able to bring value and customer service as well as advice to the end user.