Allmerica CEO: Mass. Personal Lines Capacity Woes Could Spread to Other Lines

March 4, 2004

Massachusetts has a capacity crisis not just an auto market crisis which is being played out most vividly on Cape Cod and could spill over into other lines if more and bigger companies are not attracted to the state, according to the chief executive officer of one of the state’s leading carriers.

“It’s a personal lines capacity issue now with only a few companies active in the auto market,” Allmerica’s Frederick Eppinger told a joint meeting of the Massachusetts Association of Insurance Women and the Massachusetts Society of Licensed Insurance Advisors, in Framingham, Mass. this week.

Noting that only 19 companies are licensed to write personal auto in the state, and 10 of these control 90 percent of the market, he maintained that a marketplace with “little companies can’t spread the risk” as well as a market with more companies and some bigger players. Allmerica’s Hanover Insurance Co. is one of the 19 companies still in the state’s auto market.

Even the less-populated neighboring state of New Hampshire has 50 carriers for personal lines, he said.

It’s gotten so bad in Massachusetts that “even the single-state companies are scared now.”

As evidence Eppinger cited worsening homeowners market availability problems on Cape Cod.

He maintained that the state ‘s auto market has helped to scare away most of the large national carriers such as Allstate, State Farm and Progressive – companies that also write commercial auto, businessowners and other lines — and he warned that the current lack of capacity in personal lines could soon be felt in these business lines as well.

“Massachusetts has to get some companies to increase the capacity,” Eppinger said.

He called for reforms of the way the state handles high risk drivers and a lowering of the subsidies paid by low risk drivers.

Despite the problems, Eppinger says he is encouraged because he believes both Gov. Mitt Romney and Insurance Commissioner Julie Bowler understand the problems and are going to act to change Commonwealth Auto Reinsurers (CAR), the high risk auto reinsurance pool. In addition, Bowler will be able to appoint new people to the CAR governing committee this summer, a development several observers think will help the reform efforts.

Meanwhile, as Eppinger was sounding his alarm, the insurance crisis facing Cape Cod homeowners and agents was getting worse. Two more insurance companies have copied the Cape’s largest insurer and are restricting policies for homeowners.

Last week, Andover Companies announced it would not renew the policies of about 14,000 Cape home owners because of the risk of hurricanes.

Within days, the Vermont Mutual Insurance Co. and the Norfolk & Dedham Group imposed a moratorium on new Cape home policies, the Cape Cod Times reported.

Tom Tierney, president and chief executive officer of Vermont Mutual, told Associated Press the company has no plans to drop its existing 5,000 Cape homeowner policyholders, but can’t afford to take on the risk of additional Cape policies. “We’re not in a position to handle that type of volume,” he said.

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