How Mass. Agents Feel About Managed Competition, Credit Scoring

Insurance agents in Massachusetts support the state’s move to managed competition in private passenger auto insurance but oppose insurers’ use of credit scoring in rating or underwriting.

They are expecting a lot of business movement as a result of the competitive system, with almost one-third (30.7 percent) predicting they will lose accounts as a result. A sizable 78.1 percent said they disagree with a statement that managed competition will have a minimal effect in the market because most consumers will stay with their current agencies and insurers.

In an online Insurance Journal poll completed by 76 Massachusetts agents, 56 percent said they support the move from fix-and-establish auto rates to a managed competition format, while 38.7 percent said they oppose it and 5.3 percent are undecided or have no opinion.

“It’s about time that we are given the same opportunities to secure business that they have in other states,” noted one pro-managed competition agent.

The current regulations for managed competition ban the use of credit scores by insurers. A majority of agents agree with this prohibition in rating (77.3 percent) as well as in underwriting (65.8 percent).

“Think competition is OK. Think credit scoring or socio-economic factors are unfair to good drivers,” wrote one agent.

Not all agree that the change is necessary.

“Auto rates were doing just fine under the present system. Premiums have been coming down. As they say, ‘if it isn’t broke, don’t fix it,'” said one agent opposed to the switch.

Agents are actively working to adapt to the coming change. To prepare, nearly two-thirds (75.3 percent) say they are reviewing their marketing plans and preparing for increased expenses. About half (50.7 percent) are upgrading their Web sites, seeking additional appointments (50.7 percent) and boosting advertising (54.8 percent).

More than half (52.8 percent) plan to provide consumers with competitive quotes both online and over the phone.

Agents were asked about how they think the managed care system slated for next April might affect their business. While 42.7 percent are uncertain about what will happen, 30.7 percent expect to lose accounts, 18.7 percent expect to gain business and 7.8 percent see things staying the same.

A good number (39.7 percent) also think the change could help homeowners business.

Most agents anticipate they will confront added competition with 77.6 percent predicting additional agency carriers entering the market and 81.3 percent believing additional direct writer or captive carriers will enter.

As for the effect on auto commissions, 38.7 percent expect commissions to go down under managed competition, the same percentage that is uncertain about what will happen to commissions.

While there is some uncertainty about commissions, agents are rather convinced (78.7 percent) that managed care competition will mean higher expenses for them.

A slight majority (54 percent) expects obtaining a new agency appointment as a result of competition. Of the 76 agencies completing the survey, 61.6 percent currently have two to five carriers for private passenger auto, 12.3 percent have six to 10 and 21.6 percent have one.

Even among those who support managed competition, there is some anxiety over the time frame and technology needed to make the transition. A majority (52.7 percent) said more should be given for the transition.
In terms of location, 68.9 percent of the agencies said they are suburban, 20.3 percent urban and 10.8 percent rural. About one-third (33.8 percent) have six to 10 employees, 27 percent have one to five, 24.3 percent have 11-25 employees, 9.5 percent have 26 to 50 and 5.4 percent more than 50.