Massachusetts got away from set rates for automobile insurance this year thanks to managed competition, but local agencies are staying competitive by offering discounts to their loyal, longtime customers.
Managed competition, introduced by Insurance Commissioner Nonnie S. Burne last year, took effect on April 1 and will be her on a one-year trial basis through March 2009.
It allows insurance companies to set their own rates and offer special benefits and features with the approval of the commissioner of insurance. The benefit to consumers and the marketplace is that it should ensure that drivers with good driving records get lower rates.
"It's an exciting time for the industry and the consumer. Consumers now have the option to shop around and find the best rates. It makes things very competitive," said state Rep. Brian Dempsey of Brian Dempsey Insurance Agency.
Frederick Malcolm Jr. of Anthony & Malcolm Insurance Agency Inc. is not sure how it will work.
"It's a poker game right now. Companies are trying to figure out ways to keep customers as well as gain more," said Malcolm.
One company already in the state is Progressive, but only through Internet sales, said Malcolm. The Progressive Group of Insurance Companies is the country's third largest auto insurance group. It offers consumers choices in how to shop for, buy and manage auto insurance.
"We are committed to providing products and services to independent agents to help them compete effectively in the market and help them grow. Our Massachusetts product is extremely competitively priced, and, while it's not available to independent agents in the state yet, we have committed to making it available to them next year," said John Barbagallo of Agency Operations at Progressive.
To stay in the game, many insurance companies are increasing their presence by advertising on television. Others are making sure their clients are updated on the changes and understand them before they renew their policies.
Dempsey and Malcolm are staying competitive by offering loyalty credits.
Any clients that have been with either agency for a long period of time get more discounts. The longer a client has used the agency, the bigger the discount.
Malcolm said clients are eligible at the end of the first year and the discount can range from 2 percent a year to a maximum of 20 percent.
For example, if your insurance typically costs $700 to $900, a customer with the company for three years would receive a $40 to $60 discount.
A new driver licensed for just one year with a good record would typically pay $1,500 to $1,800 a year, but a 2 percent loyalty credit would reduce their premium by $90 to $110.
"Before you do anything, ask yourself what the company is offering, and do they offer loyalty credits. Down the road, loyalty credits will be a good factor for deciding where you're going to have your insurance," Malcolm said.
Malcolm said a big home run for them right now is the combination packages they can offer for both auto and home insurance.
"If you have both policies with us then you can receive several discounts. There have been several instances where people have saved $300 to $500 a year when they combined their insurance," Malcolm said.
Local agencies caution consumers to take time to review any new policies to make sure they are getting the best deal.
"I had a client that got a deal to save $500 on her insurance. She came in to have me review it and I saw that they didn't put collision in the policy. That's where the $500 savings came from. Consumers really need to be careful," Dempsey said.
Malcolm agrees.
"Everyone is in a whirlwind right now and they have so many questions. What's the real story? Are the rates really going to go down? Nothing has played out long enough to tell. It's an interesting time for all of us but there's more questions than answers," Malcolm said.
At the end of the one-year trial, the state will evaluate how well managed competition worked for consumers.
