October 6, 2005
CAR News:
Commissioner
Orders
Physical
Redistribution
of
ERPs
…
Insurance
Commissioner
Julie
Bowler
has
issued
an
order
requiring
CAR
to
complete,
within
60
days
(of
September
30),
a
physical
redistribution
of
all
ERPs
in
order
to
"establish
for
all
servicing
carriers
overall
parity
in
the
quantity
and
quality
of
their
ERP
exposures."
The
Commissioner's
order
was
part
of
her
decision
in
an
appeal
of
CAR
rule
(Rule
13)
changes
regarding
so-called
"two-
and
three-party
agreements"
and
subscription
relief
procedures.
According to the September 30, 2005 order, two- and three-party agreements, which allow carriers to manage their ERP subscription levels independently of CAR, are prohibited effective on the date of the order. This action will help to reduce some of the manipulation undertaken by some companies and ERPs in order to impact subscription levels and ERP appointments. The Commissioner's order also establishes new timeframes and procedures for companies seeking relief from CAR for over-subscription. The rule changes approved by the Commissioner will allow companies seeking over-subscription relief to obtain it within a shorter timeframe. The order, however, prohibits CAR from conducting subscription relief hearings under the new timeframe until CAR accomplishes the ERP redistribution.
In commenting on the rule changes proposed by CAR, Commissioner Bowler and hearing officer Jean Farrington wrote, "We conclude that CAR's proposed changes to Rule 13, while they may help to correct some inequities in the current system, will be more effective if applied after a qualitative assessment has been made of all ERP business and ERPs have been physically redistributed to servicing carriers in a manner that will achieve both quantitative and qualitative parity. Such redistribution will equalize the overall quality of each carrier's ERP exposures … and will establish a level playing field for the industry."
Currently, ERP assignments focus exclusively on the number of exposures that a company "ought to have" based on its total market share. Addressing this current assignment criteria, the Commissioner's order states, "Reassigning (ERP) books of business by size alone may help reduce market disruption resulting from transfers; nevertheless we are not persuaded that a rule that addresses only the quantitative aspect of the ERP subscription system is adequate to alleviate the broader problems with the residual market ..." The order goes on to direct the redistribution of ERPs in order to attain both "numerical and qualitative equity."
As The Massachusetts Agent went to press, the timeframe for CAR implementing the Commissioner's order was unclear. The CAR Governing Committee met on Wednesday, October 5, 2005 and referred the Commissioner's order to CAR's Ad Hoc Subscription Methodology Subcommittee. The subcommittee will be working with CAR staff to implement the Commissioner's order. It is anticipated that CAR staff will consult with the Division of Insurance on a number of questions resulting from the order.
In a late development, Plymouth Rock and Norfolk and Dedham have sent a letter to Commissioner Bowler requesting her to withdraw the redistribution order. The letter also suggests that the Commissioner have CAR discuss and draft rule changes to address the redistribution procedure and have the rule changes go through the normal process and a likely public hearing.
The number of ERPs impacted by the redistribution order is not known at this time. Last month, CAR modeled the redistribution of all ERPs "with the goal of equity in terms of voluntary agent/direct written market share and ERP loss ratio." The two models released by CAR (cost-based rates and decision rates) indicated that between 110-139 ERPs would change carriers. Exposures changing carriers would be between 178,167 and 197,189.
The CAR models should not be viewed as what will actually occur in the redistribution. The redistribution will have to meet the criteria set forth in the Commissioner's order. CAR staff has begun to compile the data necessary to meet the requirements of the Commissioner's order.
MAIA will be attending all CAR meetings that deal with the redistribution process and will work to assure that the transfer of business will be as seamless as possible with little disruption to producers and policyholders.
Should you have any questions or need additional information, feel free to contact either Frank Mancini or Dan Foley at the MAIA offices by phone at 800-972-9312 or 508-628-5452 or by email at fmancini@massagent.com or dfoley@massagent.com.
Non-Renewal
Procedures
for
Limited
Servicing
Carrier
Program
…
CAR
recently
issued
Commercial
Lines
Notice
No.
87
regarding
non-renewal
procedures
for
policies
that
will
be
moving
from
one
carrier
to
another
due
to
the
implementation
of
the
Commercial
Limited
Servicing
Carrier
Program.
As
previously
directed
in
Commercial
Lines
Notice
No.
84,
insurers
are
required
to
send
non-renewal
policies
to
the
producer
of
record
a
minimum
of
45
days
prior
to
the
expiration
date
for
those
policies
that
are
to
be
non-renewed
as
a
result
of
the
policies'
placement
with
a
new
Servicing
Carrier
for
coverage
effective
in
2006.
The format of the non-renewal notice should be in accordance with the provisions of MGL c. 175, § 113F and should contain the insured's name, policy number, and a statement advising the insured of the insurer's intent not to renew the policy. The non-renewal notice should also advise that the insured may be eligible for coverage in CAR.
Ceded
Commercial
Rate
…
Late
last
week,
CAR
issued
Commercial
Lines
Notice
No.
86
announcing
that
it
has
not
filed
for
a
change
to
ceded
commercial
rates
and
that
the
October
1,
2003
commercial
rate
will
remain
in
effect
for
policies
effective
October
1,
2005
and
subsequent.
This
means
that
the
October
2003
CAR
rates,
commissions,
classification
standards,
territory
definitions,
Manual
Rules
and
Experience
Rating
Plan
will
continue
to
apply
to
ceded
policies
effective
October
1,
2005
and
subsequent.
Workers'
Compensation
Corner
…
The
Workers'
Compensation
Rating
and
Inspection
Bureau
of
|Massachusetts
(WCRIB)
has
just
released
Circular
Letter
Nos.
2002
and
2003.
Circular Letter No. 2002 is accompanied by Dept. of Industrial Accidents (DIA) Circular Letter No. 320 which addresses COLA Payment and Reimbursement Schedules; Maximum and Minimum Weekly Compensation Rates; Attorneys' Fee Schedule; and Change to Mileage Reimbursement Rate for Workers' Compensation Claims. To download the complete Circular Letter click here.
Circular Letter No. 2003 announces that the premium for sole proprietors, partners of a legal partnership, and members of an LLC who elect to become employees and obtain workers' compensation insurance coverage shall be based on the establishment of a fixed amount equal to the State Average Weekly Wage (SAWW) x 52 weeks.
Effective October 1, 2005 (new and renewal policies), the SAWW in the Commonwealth of Massachusetts is $958.58 x 52 weeks = $49,846.16. The established rounded fixed amount to be used for premium determination shall be $49,800.
Bits & Pieces …
Commissioner
Approves
Vehicle
Series
Rating
Rule
for
2006
…
The
Division
of
Insurance
has
approved
the
Automobile
Insurers
Bureau
(AIB)
filing
of
Private
Passenger
Insurance
Manual
Rule
25
(a
new
rule)
entitled
"Vehicle
Series
Rating"
(VSR).
A
copy
of
the
rule
is
reproduced
below.
Currently in Massachusetts, when the Insurance Services Office (ISO) initially produces a symbol for a vehicle model, that symbol is used in rating that vehicle for physical damage for the life of the vehicle. In other states, there is full implementation of the VSR program including symbol reassignment in which ISO reviews Comprehensive and Collision loss experience by vehicle series and symbol revisions reflecting the results of the VSR review are implemented on October 1 of each year. Starting with 2006 model year vehicles, Massachusetts will implement the VSR program.
Reassignment of symbols may only be applied at policy issuance or renewal and only for 2006 and later model year vehicles. A policy shall not be changed mid-term solely due to a change in symbol assignment based on symbol review.
Rule 25. Vehicle Series Rating
Vehicle Series Rating (VSR) is a program applied by the Insurance Services Office (ISO) to adjust the Price New Symbols of vehicles to increase or decrease the symbol due to loss experience reflecting crash damage, ease of repair, cost of repair parts, and theft for the particular vehicle, result in the Rating Symbol. The Rating Symbol is used to determine a vehicle's premium for Collision, Limited Collision and Comprehensive coverage. The VSR program reviews the symbol assignments for all vehicle series three times: when the model year is introduced and in each of the next two annual VSR review years. The symbol for a particular series may be upsymbolled, downsymbolled, or may remain the same.Reassignment of symbols shall be effective with 2006 and subsequent model year vehicles and may only be applied at policy issuance or renewal. A policy shall not be changed mid-term solely due to a change in symbol assignment based on symbol review.
Revised
W/C
Pool
Application
…
Effective
September
1,
2005,
the
Division
of
Insurance
approved
revisions
to
the
Workers'
Compensation
Assigned
Risk
Pool
Application.
The revised form, which is labeled "EFFECTIVE SEPTEMBER 1, 2005 - (EDITION 01)," is currently available for use, but its use will not be mandatory until January 1, 2006.
MAIA will conduct a "Lunch & Learn" webinar on the new application on November 2nd. Watch your email or visit massagent.com® for more information.
Ease
of
Doing
Business
Survey
Results
…
Deep
Customer
Connections,
Inc.
recently
conducted
a
survey
of
agents
with
the
Independent
Insurance
Agents
and
Brokers
of
America
(IIABA)
to
determine,
among
other
things,
the
importance
of
"ease
of
doing
business"
to
independent
insurance
agents.
The results of that survey are now available and have been posted on the MAIA website, massagent.com®. To view/print the results, click here.
In
Control
Advanced
Driver
Training
Targets
Teen
Drivers
…
Studies
show
that
43%
of
new
drivers
are
involved
in
auto
accidents
their
first
year
of
driving.
In
an
attempt
to
reduce
the
number
of
accidents
among
teen
drivers,
In
Control
Advanced
Driver
Training
(ADT)
is
educating
young
drivers
using
hands-on
advanced
driver
training
techniques.
MAIA
encourages
you
to
share
information
about
this
program
with
your
customers
who
have
newly
licensed
family
members
and
persuade
them
to
participate
in
an
InControl
ADT
training
session.
Research
shows
that
advanced
driving
training
programs
reduce
the
number
of
crashes
among
new
drivers
by
more
than
70%.
InControl ADT offers a unique half-day hands-on course developed by professionally trained racecar drivers who also train police, firefighters, EMTs and other emergency response drivers. New driver will learn how to effectively use ABS brakes, skid control, the effects of speed on control, the dangers of tailgating, problems with backing up and an emergency lane change.
InControl
costs
$299
($150
for
second
family
member
and
$100
for
additional
family
members
on
same
day).
For
more
information
about
InControl
ADT,
please
call
888-301-SAFE
or
visit
InControladt.com.
|
|
888.301.SAFE
Does
Your
Bank
Know
Your
Business?
How
to
Choose
the
Right
Bank
for
Your
Agency
...
As
an
independent
agent
or
agency
owner,
you
have
unique
financial
needs.
Unfortunately,
few
banks
truly
understand
those
needs.
Worse
yet,
it
has
become
the
norm
for
banks
to
also
sell
insurance,
meaning
they
actually
compete
against
you.
You
can
find
a
bank
that
understands
the
uniqueness
of
the
independent
agency
and
offers
products
and
services
uniquely
tailored
to
suit
agents'
operations.
The
purpose
of
this
article
is
to
help
you-the
independent
agent
or
agency
owner-find
the
right
bank
for
your
agency.
Choosing
an
agency-focused
bank
is
one
of
the
most
important
things
you
can
do
to
help
your
agency
grow
and
succeed.
Callout
quote:
Choosing
an
agency-focused
bank
is
one
of
the
most
important
things
you
can
do
to
help
your
agency
grow
and
succeed.
1. Does the bank understand your unique cash flow?
All banks offer business deposit products such as checking and savings accounts. However, independent agencies are not like many other businesses. They have unique cash management needs by virtue of monthly fluctuations in premium payment volume. A bank that recognizes this difference will offer a range of specialized deposit products to help agents facilitate cash management and maximize value.
For example, when it comes to better ways to make the most of your daily operating funds, find out if your bank offers an account specifically designed to give you a preferred interest rate on your premium trust deposits. Also, depending on the amount of excess cash your agency has available, perhaps a sweep account that automatically transfers excess cash into an investment account is appropriate. Another helpful cash management tool is a custom-term certificate of deposit-where you determine the maturity date that best matches your cash flow cycles. Your bank might offer online banking, money market accounts, and overdraft protection to business customers. However, it's important to read the fine print and ask your banker about the product features, interest rates, and monthly fees to make sure these accounts meet your specific financial needs.
2. When you need a loan will you be able to get one?
What sets a good bank apart from a great one is its understanding of how independent insurance agencies work. This understanding is especially important should you need a sizeable loan for agency acquisition, perpetuation or producer development. While all lenders factor a business's collateral into their loan decisions, not all lenders define "collateral" the same way. Traditional banks typically require tangible assets to collateralize a business loan. The problem is, agencies don't have much to show in tangible assets. In the absence of inventory or equipment, agents may be required to pledge their homes or other personal assets.
The solution is to look for a lender that understands it is your total book of business that reflects your agency's size and strength. They will be more likely to define "collateral" more broadly by taking into account your agency's history, the relative stability of its cash flow, the strength of your client relationships, and the ongoing potential of your book of business. This can make all the difference when an agency principal needs capital to expand, buy out a competitor, or keep the business in the family.
Callout
quote:
The
solution
is
to
look
for
a
lender
that
understands
it
is
your
total
book
of
business
that
reflects
your
agency's
size
and
strength.
3. Is the bank competing for your clients?
In the last few years, federal regulations have changed the face of the financial services industry. What does that mean to you? More and more traditional banks have entered the insurance business. Why would an independent agent want to bank where their deposits can help finance expanded initiatives like selling more insurance? For many agents, doing business with a bank that sells insurance simply boils down to aiding a competitor.4. Is the bank your trusted business partner or just a transaction manager?
What level of service does your agency command at the bank? Of course, you expect accuracy and quick processing. But the real measure of a bank's service to your agency is its ability to help you solve business problems. First off, is your banker accessible? And, does he or she understand your business well enough to recommend financial efficiencies? Will your banker offer a variety of options to solve your problem? Bottom line, do you consider your banker a valued and trusted advisor, dedicated to the financial vitality of your operation? If not, your agency may be much better served by a bank more focused on customer service.
If you're not happy with your current bank or wonder if there's one better suited to your agency, the important thing to know is that you have a choice. You don't have to stay with your current bank just because it's comfortable. Insurance is a specialized industry. A bank that specializes in serving independent agents and agency owners will be more likely to appreciate the challenges of running an agency and provide the products and services agencies need to grow and prosper. Making the switch may take some time and effort, but it could be one of the most important decisions you make in helping your agency grow and succeed.
The Massachusetts Agent
Donna M. McKenna, Vice President of Communications & Editor — dmckenna@massagent.com
Copyright© 2005 - Massachusetts Association of Insurance Agents
137 Pennsylvania Avenue - Framingham, MA 01701
Website: massagent.com®