Insurance Fix in Massachusetts Irks Small Insurers


Small time insurance providers in the state of Massachusetts are voicing out their sentiments over the state government’s plans to further deregulate the insurance industry.

Insurance Fix in Massachusetts Irks Small InsurersMassachusetts’ Department of Insurance is set to implement a new auto insurance method called “managed competition” to encourage the entry of new insurers and hopefully result in lower premiums. Despite the highly ambitious plan, state Governor Deval Patrick and his insurance commissioner Nonnie Brunes are receiving flak from small-time inner city insurers. The small firms argue that the changes are threatening to drive them out of business.

The state government and the insurance division have also begun to implement the new system and phasing out the old system. However, the changes also mean getting rid of a certain type of insurance agents, the “exclusive representative providers” or ERPs.

In the past, ERPs identified high-risk drivers and assigned them to a special industry pool known as Commonwealth Automobile Reinsurers. This has since been replaced by the Massachusetts Automobile Insurance Plan. The new pool requires insurance providers to have direct relationships with drivers residing in highly urbanized areas. State officials initially thought that the new system would encourage drivers to drive more responsibly and avoid getting traffic tickets and citations.

Burnes, the insurance commissioner, says that Massachusetts is seeing more and more ERPs shifting their focus from their traditional methods to working as representatives and agents for different insurance firms. In fact, Burnes adds that the number of ERPs have dropped by almost two-thirds this year alone. As of Jan. 1 of the present year, there were 212 ERPs. Last week, only 75 remained active. The insurance commissioner also explained that the state’s Division of Insurance has also assigned a special ombudsman to assist the remaining ERPs find alternative insurance fields and adapt to the new system.

There are, however, some concerns that the new system will make it harder for drivers in the inner city to gain access to car insurance. With no more ERPs, car owners who rely heavily on known insurance agents can lose the ability to navigate through the complex world of car insurance. Critics also say that by implementing the new system, the state is essentially driving small establishments like inner city insurance providers out of business. These insurers will also have to let go of their employees once tougher competition steps in. Aside from the potential unemployment, neighborhoods can also lose sponsors of sports events and other community activities, they contend.