Mass. Agents Assn. Stresses Need for Participation in Auto Cost Study

February 4, 2004

If you’re asked to participate in the 2004 private passenger auto insurance agency cost study, it’s crucial for your future to do so.

That’s the message the Massachusetts Association of Insurance Agents (MAIA) is hammering home to members as its actuary, Tillinghast, begins contacting randomly selected agents in February.

The study will pinpoint how much it costs an average agency in Massachusetts to service a private-passenger auto policy for one year. That number will become the foundation of MAIA’s case to win fair 2005 private-passenger commissions in the rate hearings this fall.

To remedy low agent participation that marred the 2002 survey, MAIA has simplified the survey forms and is letting all members know how essential it is to participate. It is expecting that about 170 agencies, roughly one-tenth of the membership will fill out this year’s form.

Relatively few agents participated in the previous study, and the Attorney General and State Rating Bureau claimed it wasn’t a credible sample. Insurance Commissioner Julie Bowler agreed and gave it little weight in her decision setting 2003 commissions.

“It’s imperative that agents who are asked to participate do so. Otherwise, everyone’s commission is in jeopardy. You can’t just pass it to someone else and say, ‘The next guy can do it,'” said MAIA Chairman Bob Vaudreuil.

MAIA and Tillinghast are taking every step to ensure that the new survey will get broad agent participation and be an unimpeachable sample.

Consulting actuary Kathy Barnes divided MAIA membership into six “buckets” made up of large and small agencies in three geographic regions: one, Greater Boston inside Route 128; two, eastern and central Massachusetts; and three, western Massachusetts, Cape Cod and the islands. Agencies in each region have similar costs for labor and office space.

“The bucket design assures that the random sample will include small and large agencies in all parts of the state,” Barnes said. After each agency has been assigned to a bucket, Barnes will have a computer randomize the names. She will then start calling agencies that went to the top of each of the six lists. Forms will be sent to participating agents in April.

Completing the key part of the form simply requires filling in numbers taken directly from the agency’s 2003 tax return.

“The data should not present a problem for any agent. Most agents should already have it to run their businesses. Filling out the form should take maybe a couple of hours,” Vaudreuil said.

He reiterated how important it is for selected agents to participate.

“Perhaps the agents who said in 2002 that they don’t have the time don’t realize they can’t keep passing the buck. There’s really no one to pass it to because the survey truly has to be random.

“If I were one of those agents who didn’t participate when asked and as a result had my commissions cut, I wouldn’t want anyone to know I didn’t participate. The guilt would be hard to bear. The buck is going to stop with that phone call you may be getting. That will be the moment of truth,” Vaudreuil said.

Besides offering information and making the forms more user-friendly, the association can’t do anything more to encourage members to participate because the survey must be completely hands-off and anonymous, he added.

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