30% of Mass. Agents Expect to Lose Auto Business under New Managed Competition

Massacusetts insurance agents dealing with the switch to managed competition are expecting a lot of business movement as a result of the competitive system, with almost one-third (30.7%) predicting they will lose accounts as a result.

A sizable 78.1% said they disagree with a statement that managed competition will have a minimal effect in the marketplace because most consumers will stay with their current agencies and insurers.

The results are from an online survey by Insurance Journal completed by 76 Massachusetts agents.

Agents were asked about how they think the managed care system slated for next April might affect their business. While 42.7% are uncertain about what will happen, 30.7% expect to lose accounts, 18.7% expect to gain business and 8% see things staying the same.

A good number (39.7%) also think the change could help their homeowners insurance business.

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

As for the effect on auto commissions, 38.7% expect commissions to go down under managed competition, the same percentage that is uncertain about what will happen to commissions. A minority (10.7%) see commissions increasing or not changing (12%).

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

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

Even though a majority (56%) supports the move to a managed competition system, there is some anxiety over the time frame and technology needed to make the transition. A majority (52.7%) said more time should be given for the transition.

“For such a significant change in our market place, implementation time lines are very short to properly assess the technology issues and detail to competently move to a managed competition system in Mass. Bottom line, there will be confusion in the distribution system during 2008 an in turn causing our clients unnecessary concern and upset. In addition, without a common insurance carrier delivery system, the added expense in enormous,” offered one agent.

“I would feel much better if I knew that the technology was in place to do our rating on April 1. Also, it would be nice to know that the companies are ready and at this point it doesn’t seem like they are,” added another.

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

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

In terms of location, 68.9% of the agencies said they are suburban, 20.3% urban and 10.8% rural. About one-third (33.8%) have six to 10 employees, 27% have one to five, 24.3% have 11-25 employees, 9.5% have 26 to 50 and 5.4% more than 50.

For a complete report on the results from the agents’ survey, see the Dec. 3 issue of Insurance Journal magazine.