On June 30, 2011, Ralph “Buddy” Iannaco will step down after 13 years as the President of CAR and a 30-plus career in the Massachusetts insurance industry. Keeping to his open door policy until the last day, he let Agency Checklists come in and ask a few questions regarding his career and what he’s got planned next.
Why don’t we start at the beginning just in case there are some new agents (or non-agents) out there that might not be too familiar with CAR- What exactly does CAR do?
CAR is the administrator of the Massachusetts Automobile Insurance Plan known as the MAIP. We are set up to provide an instant certification and assignment of an insurance policy for a risk. In the old days, before the MAIP, we were a residual market that was a pooling mechanism where basically all the insurance companies shared in the profits and losses of the pooled risks.
Agents with no voluntary contracts were assigned by CAR as exclusive representative producers to a specific company. Whenever they had an insured they would submit that insured to their own assigned company and the company would either retain the policy or cede it to CAR. All the policies that were ceded to CAR were paid through the premium dollars collected for those policies. More often than not, however, those policies, the claims outweighed the premium therefore CAR ran at a deficit, and all the companies shared in the losses associated with the pooling mechanism. That was known as the residual market. And I think that’s enough for agents to know that because that was years ago anyway.
Yes. But, always nice to know a little history and today?
So today, all producers are assigned risk producers and are certified by CAR – we provide each producer with an assigned risk stamp and a producer will make an application to CAR on a web site specially set up. They’ll submit the pertinent information for a particular risk, online, and then CAR will assign it to a carrier, and we assign a risk simply stated by market share. So company X, that company will receive X amount of assignments, depending on the size of their market share. We do it on a rotating basis based on what is known as a quota share. And it’s a little bit technical, but that’s basically the biggest difference between the two.
And your personal history? How did you get into insurance?
I started at the Division of Insurance in 1964. I was the secretary to the Motor Vehicle Appeals Board, which is still in effect today. That Board today is presently responsible for hearing appeals on surcharge notices and surcharge appeals. But, back then we spent most of our time hearing appeals of insurance cancellations.
And then when the merit law went into effect in the early 1970s, we developed a merit rating surcharge appeal process which is basically the same appeal process that’s in effect today. I worked for the Insurance Department from 1964 until 1998 during which time I was appointed to various positions within the Division – from secretary to the Board to the executive secretary and finally a deputy commissioner of insurance of consumer services, back in the late, or mid-80s, I believe. After becoming Deputy Commissioner and then Chief of Staff, in 1995 or 1996, I eventually became First Deputy Commissioner and served at that post until I retired from the Division in 1998. I then reported to work as the president of CAR on March 1st of 1998. So that is my insurance background; a snapshot of it anyway.
Let’s talk about the last 10 years at CAR. There’s been a couple of changes, to put it mildly. Are you happy with the transitions that have occurred?
I think now that we’re here I think it’s very positive. I think it’s good for our producers, it’s good for insurers and I think it’s good for our consumers. It’s just a matter of how everybody handles it, however. From the agent’s perspective anyway, I think it has made agents have to evaluate how they are handling their books and how they can provide the best service for their consumers and I think competitive rating is allowing agents to provide that service better. So I think it’s a very positive change.
Change is always hard, isn’t it?
Changes are hard. I think that early on some people recognized the fact that change was coming and embraced it. Other people didn’t think it was coming and were slow in embracing it and then I think there was a third group that did not believe that change was actually going to happen.
They still can’t believe it?
I think they finally do now. In fact, we spent months and months conducting seminars with producers to try to educate them to the best of our ability what the changes would be regarding the MAIP and the application of the MAIP.
So do you see a bright future for independent insurance agents with managed competition?
I don’t know if bright is the word. I think there’s always going to be a need for agents and this state is so accustomed to having agents. I think in Massachusetts when you ask the average driver who’s your insurance company, they immediately will say their agent’s name versus their company. Now, as people are becoming more sophisticated, shopping online and with the amount of PR that’s going on by insurers, I think people are now beginning to understand that there is a difference between a producer and a company and some may be dealing more directly with the companies. So I think that it behooves the agent to stay awake and not fall asleep at the switch so to speak.
What are some of the challenges you see for the mass auto market as you look back?
Embracing and using technology and figuring out how to maintain and attract your good positive customer base, to bundle products for customers and to get the best product for clients either in the commercial or in the personal lines market. So I think that the challenge for agents is to keep those avenues working all the time because it’s vital.
Do you have any particular advice for agents or brokers of insurance companies relating to the operation and direction with CAR?
It’s important for our agents to continually monitor CAR’s web site. Our web site is very informative; it’s really a key for them. You can always get up-to-date information on what’s happening in the assigned risk world and on communications to and from the Division of Insurance. At our committee level, we always have the information posted so by tuning into our web site periodically you keep up to speed on the events which is a good practice for agents, I think.
Let’s talk about the CAR website. I believe it was created with your oversight correct?
Yes, yes it was.
How did it come about?
What I did was when the system was put into place I created working groups – and each working group was responsible for certain aspects of the web site. I think there were 14 different working groups in total. I – and a lot of people – brought a little bit of knowledge to each one. We basically went into a R&D process for months to bring about an application that would satisfy the needs of the producers and then bring about the changes we needed for the MAIP. We met with a series of actual producers and looked at the actual insurance application; we talked to producers to ascertain what they needed and how to present it, it was a mix and match process. So that did take a lot of time and it was really challenging but a lot of fun. And we hear from people all over the country now, lauding our great web site and asking us for information, so it has turned out to be something we’re all proud of. I feel especially proud about it myself.
It seems your career has come full circle. You started in insurance when there was an assigned risk pool and after a hiatus of almost 35 years there’s an assigned risk pool again. What difference do you see between then and now as to these assigned risk pools?
The technology used today to make an immediate assignment, and the impacts of competitive rating. Now the rate that we originally filed had some parameters – the Division of Insurance gave us some capping instructions when we had to set the rate, I mean, we had to look at the indications obviously, but then we, when we calculated the rates there were with certain limitations and they’ve been able to keep the rate, rates somewhat low.
And number two, Lane-Bolling is in effect, so the voluntary rate or the lower rate of the two from what a company would offer as a voluntary rate has to be used so I think that’s really the two big issues in comparing the two time periods.
As an assigned risk pool before specialized producers were common, there were those who only serviced assigned risks, the so-called assigned risk brokers. Do you see the present assigned risk plan spawning similar specialists?
We do have some former ERPs who have not obtained a voluntary contract so I guess you could call them specialists. Although everyone has access, not every producer, but most have used the assigned risk pool.
So what’s next for you?
Well, I guess you will still be seeing me around for a bit. I have a short term engagement at CAR for now to help during the transition period to a new President which we expect to have in here in a couple of months.
Well, it’s funny you ask the question. I have had a few people ask if I’d be available to consult and help out in some endeavors so I am thinking about having a very small practice available to assist and consult. I’ve always been working so the idea of not working is difficult.
Will you still have the same contact information?
Everyone has my phone number but, my new email address will be firstname.lastname@example.org.
If you could go back, is there anything you would have done differently?
That’s a good question. It’s something that I do think about daily and honestly I think I can say that whether at the Division or CAR or in my life, there is not really anything that had I the chance to do over I would really change – except, perhaps smoking cigarettes as a young man – other than that my life is pretty much an open book. That’s always been my style so I don’t really have anything I regret. I just always believed in a team approach and an open door philosophy.
Well, thank you for letting us in and good luck.