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Direct Writers Continue Battle for Massachusetts Auto Market

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Direct writers continue to target the Massachusetts personal auto insurance market, as one major national carrier announced it has written its first policy in the state and another says it will begin writing direct in Massachusetts as early as the fall.

Geico, the third largest auto insurer in the nation, began writing insurance in the state last month – even holding an informal reception in Boston to mark the event, while executives greeted local and state officials. The company first announced earlier in the March that it would begin quoting and writing auto insurance in the Bay State.

“We have been looking forward to serving Massachusetts drivers for a long time,” said Steve Cunningham, regional vice president, in a statement released by Geico. “We are very happy to be here and doing business with Massachusetts residents. We think we can bring them low rates and great service.”

The first policy was sold to a woman in Whitman, Mass., a bedroom community about 20 miles south of Boston.

Allstate Targets Fall

Not to be outdone, on that very same day — May 18 — Allstate Insurance Co. said it had filed rates and policy forms with the Massachusetts Division of Insurance to re-enter the Massachusetts auto insurance market after an absence of over 20 years. Allstate says it is targeting November 2 to begin selling policies.

“People are looking for value and choice,” said George Ruebenson, President of Allstate Protection. “As a company with a solid reputation and a national presence, Allstate will provide Massachusetts consumers with additional automobile insurance choices from an established insurance provider.”

Allstate said the decision was directly related to changes in the state’s regulatory structure – known as managed competition – that went into effect last year.

“This is the 11th new company to enter the market since then,” said Insurance Commissioner Nonnie S. Burnes. “Managed competition is designed to bring more choice in cost, coverage and companies to Massachusetts drivers, and this filing further demonstrates that managed competition is working and Massachusetts consumers are reaping the benefits of automobile insurance reform.”

Brett Ludwig, a spokesman for Allstate, said the company began seriously looking at re-entering the Massachusetts personal auto insurance market in 2008, just after managed competition went into effect.

“I would characterize our decision as a careful deliberation,” Ludwig said. “We will be the first captive agent that is taking a look back in.”

Brand Confusion?

Allstate says Massachusetts consumers will be able to purchase insurance online, as well as through Allstate agencies in Connecticut, New Hampshire and Rhode Island.

Although it’s direct- and captive-written brand has been on hiatus for nearly a generation in the state, Allstate is no stranger to the Massachusetts auto market. It’s the parent company of Encompass Insurance, an independent agent-distributed insurer that has been writing in Massachusetts for years.

As to the difference between the two brands, Allstate Spokesman Ludwig said that “Encompass is marketed toward a slightly different consumer base than the consumer brand… Encompass caters to a more affluent market place.”

There are a few milestones for Allstate before it hits the November 2 target date to begin selling. First, it will need to have its rate filing approved by state regulators. And from a sales point of view, Ludwig said, Allstate must also begin ramping up a sales force of nearby agents in border states to sell policies.

“We’re going to come back into the state using the border-state strategy, and then we will take a look and evaluate we’re doing,” Ludwig said. “Assuming that we are moving forward, we’ll take a look at” next steps.

Independents Versus Captives

That may or may not include recruiting captive agents in the Bay State that would sell Allstate policies exclusively.

“It’s too early to know definitively whether we’ll move in that direction,” Ludwig said. “It involve a significant investment on our part as well as by individual business owners.”

Frank Mancini, president of the Massachusetts Association of Insurance Agents, said that despite the entry of direct writers like Geico, Progressive and Allstate, the independent agent community has held out pretty well during the first year of managed competition.

“I don’t know the exact market share, but I would suggest that it hasn’t changed a great deal over the last year between direct writers and independent agents,” Mancini said. “Our feeling is that agents will continue to compete. Geico, for example, doesn’t sell homeowners insurance and one of the biggest attractions in insurance is writing the combination of policies.”

As to whether or not Massachusetts independent agents would be tempted to sign on as exclusive Allstate agents, Mancini said he doubts that would happen — even for agents who may be losing business.

“Independent agents in the state are loyal to being independent,” Mancini said. “I think it’s very unlikely that any independent agent would be tempted to become a captive of Allstate or any other company for that matter.”


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