Agents Wade Into Managed Competition
New auto rates coming Nov. 19
Things are starting to get hectic for the state's insurance agencies, and they aren't likely to calm down for months. The era of "managed competition" is dawning in Massachusetts, and while auto insurance companies will not file their new rates until Nov. 19, local agencies are already preparing for the new system. And between now and April 1, when the rates take effect, they will have plenty to keep them occupied.
For some agencies, especially smaller ones, the first order of business is figuring out which new brands of insurance they should carry. Jack Woods, the president of the Thomas J. Woods Insurance Agency in Worcester, said that in past years state-set rates meant it hardly mattered how many insurance companies he worked with. The agency actually dropped down from carrying four carriers' plans to just two to avoid the hassle of working with different systems.
New Products
Woods said the agency has now raised that number to three, signing a new company that he hopes will offer especially competitive rates for residents of the City of Worcester. Depending on how much difference there is in the rates companies ultimately announce, he said he may look at adding carriers.
"We're talking to others now just to make sure we're covering our bases," he said.
Even agents that already sell a range of plans are waiting expectantly for the Nov. 19 filings. Natick-based Eastern Insurance Group LLC already works with "pretty much all" the insurance companies that operate in the state, according to Executive Vice President John Koegel. But he said the agency may need to buy new software to determine rates under multiple systems, and it will certainly need to train its employees to compare rates and find the best option for each customer.
"We really can't do that yet because the companies haven't come out with the particular guidelines," he said.
"I'm sure there will be other courses, seminars, workshops, whatever," he said.
With competition comes the need to reach out to customers, so local agencies are also gearing up for advertising campaigns.
"It's just a matter of doing business," said Jack Snow, president of Northwood Insurance Agency Inc. in Northborough.
Koegel said Eastern Insurance expects to do some ad campaigns in cooperation with its carriers and will also reach out to existing customers with mailings and e-mails, and during regular conversations.
"There's going to be a big education process for the customers," he said.
Woods said that no matter how much education customers get in advance, plenty of people will start calling in April to figure out their options for switching coverage.
"We're prepared for a very busy spring and summer," he said.
Waiting For Geico
Along with the question of what rates the state's existing insurers will file, agents are waiting to find out whether national insurers like Geico that sell directly to consumers will come to the state. Currently, agencies dominate the Massachusetts auto insurance market, and much of the talk about the state's new system has revolved around the idea that it will bring more of the direct-sales companies to the state.
But local agents say they don't expect to see those companies selling in Massachusetts for at least a year, and possibly not at all, depending how the new system shakes out. The state is phasing in managed competition, and many aspects may change over the first few years.
Woods said the direct sellers may be discouraged by the fact that, at least for now, insurers are not allowed to use data like credit scores to set rates.
"It doesn't look like the national carriers will have the business model available to them that they use in other states," he said.
If the Geicos of the world do come to Massachusetts, some agents say it can't help but cause them some pain. But, they say, independent agencies also have certain advantages that make them very attractive to customers. For one thing, they let customers buy homeowners' coverage and other types of insurance at the same time they cover their cars. For another, they can help buyers compare different companies, and, in case of an accident, help them navigate the claims process.
Bob Mucci, vice president of Wolpert Insurance Agency, which has offices in Worcester and Braintree, said some people may buy directly from an insurer to get minimal coverage at minimal cost. But he said those who have more money and know more about insurance will probably continue to work with agents.
"The services of a local, independent agent who's an educated force out there serving you as the insured is a real benefit with no cost to you," he said.
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