Best Interests

A Massachusetts lawmaker who is a former independent agent recently charged that local independent agents opposing some of the state’s auto insurance reforms are only interested in their own agencies’ values and not in what is best for their customers.

Shame on him! Independent agents have a right to speak out and voice their political views, even when they don’t agree with the prevailing thinking. They are, after all, independent. Most people think that is healthy for the American Agency System, for consumers and, by the way, for democracy. How is he so sure that agencies supporting the change are doing so because they think it’s best for their customers and aren’t also weighing what’s best for their own agencies?

Independent agents’ own best interests often align with their customers’. Isn’t that what the American Agency System is all about? While agents may disagree over the best way to proceed on auto insurance, just as they may disagree over which carrier is best for a customer, this does not necessarily mean one side in the debate is holier than the other.

In fact, perhaps both sides are exaggerating the good and the bad of managed competition. To believe some critics, here’s what is bound to happen:

• Many of the state’s 1,700 agencies will be going out of business.
• The value of the agencies that survive will be diminished.
• There will be a record number of agency mergers.
• Direct writers and Internet sellers will swoop in and grab market share from the domestics, costing local jobs.
• A giant national company will buy up one or more of the domestic insurers and relocate the headquarters out of state.
• Rates will skyrocket for young and urban drivers.
• Insurers will secretly use proxies for credit scores and income.
• New products will be mostly useless add-ons.
• The assault on auto will also hurt agents’ homeowners business.
• Agency commissions will go down.
• The uninsured and assigned risk pool populations will grow.
• Body shops and glass companies will be squeezed and claims service will plummet.

All in all, it won’t be pretty for independent agents, their companies and their customers. But then there is the bright picture painted by advocates of managed competition:

• All good drivers will save money and be treated fairly.
• Consumers will come to appreciate independent agents more than ever.
• Competition will bring new products and coverages that insureds will love.
• Competition for auto business will actually help agencies grow their homeowners.
• Agencies will benefit through additional appointments from carriers.
• The agencies that survive will be more valuable than ever.
• Competition will control rates for urban, young and other high risk drivers.
• Competition will lower costs of body shop and glass company services.
• More companies will enter the market and create jobs and opportunity.
• Local media outlets will enjoy a rush in insurance advertising deals.

Perhaps one of these extreme scenarios is closer than the other to what will happen. But whatever happens, policymakers and lawmakers will hopefully continue to encourage competition in ideas — not just in pricing and service.