Massachusetts Encouraging Brokerage Agreements for Former ERPs

February 5, 2010

Most Massachusetts insurance agents who were appointed as exclusive representative producers (ERPs) under the state’s previous insurance regime have obtained voluntary contracts with insurers or have merged with other agencies as a result of the new, managed competition system, said Acting Insurance Commissioner Joseph G. Murphy in a bulletin issued today.

However, a small number of former ERPs have been unable to obtain voluntary contracts and continue to write private passenger automobile insurance business exclusively in the state’s residual market. Murphy said the state is committed to assisting former ERPs and their customers during this transition away from the previous, state-regulated auto insurance system.

Murphy said the state encourages insurers to offer brokerage agreements to former ERPs without voluntary contracts wherever possible. A brokerage agreement allows a producer to sell insurance through an insurer and provides the opportunity to cultivate a productive relationship that may lead to an agency appointment with the insurer, Murphy said.

The use of brokerage agreements also will serve to reroute some risks to the voluntary market that otherwise would land in the residual market.

The nature and details of such brokerage agreements are subject to negotiation between the insurer and the producer.

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Source: Massachusetts Division of Insurance

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