Massachusetts’ “Managed Competition” Program Assessed


After two years in existence, the state of Massachusetts’ new car insurance system continues to receive mixed reviews from industry experts, insurance agents, and drivers alike.

Massachusetts’ “Managed Competition” Program AssessedThe “Managed Competition” system was put in place by the state government through the Division of Insurance in April 2008 to help bring down the cost of car insurance. State officials had hoped that the new system would encourage more carriers to enter the auto insurance market and spur lower rates because of increased competition.

Already in its second year, the program has earned both praises and criticism from many residents and figures in the state.

In the past, the state government set premium costs, effectively regulating the insurance providers’ ability to earn additional revenues by increasing rates. This decades-long system was removed last year to make way for the new “managed competition” system.

Many advocates cited the likeliness of new carriers entering the state while opponents said the new system could lead to discrimination of select drivers. The state’s insurance agents could also suffer from the entry of cheaper premiums, they add.

Experts say that the predictions have not fully happened at all and that there have only been minor changes in the present nature of the car insurance industry.

Three major companies have entered the auto insurance market in Massachusetts after the system was overhauled: Progressive, Geico, and Allstate. The three providers are currently offering their products through their websites and 800 numbers. Unlike many small-sized providers in the state, the companies have avoided hiring local agents.

Frank Mancini, president and CEO of the Massachusetts Association of Insurance Agents, says that because the state is still revising regulations pertaining to car insurers, the three companies could leave if they dislike the ongoing developments.

Aside from the three major insurers, six smaller providers have also joined the fray but have employed the services of local agents.

Some people have also expressed concern that the new system, which allows the entry of direct writers, can lead to the loss of business for many local insurance agents.

Mancini says that even with some consumers switching to the bigger providers, agents have yet to suffer substantial losses. He adds that independent agents handle up to 78 percent of auto insurance policies in the state. The national figures are much lower, 30 to 35 percent.

The state’s division of insurance has recently released data indicating that in the one-year period since the establishment of the new program, the average car insurance cost in the state has gone down some 4.8 percent.

Mancini, however, says that the rates have been falling in recent years.