After a very shaky start in the early 1970s, Commerce Insurance became the major player in the then highly regulated Massachusetts automobile insurance market. By the end of the “fix and establish” rate-setting system in 2008, Commerce had garnered over 31% of the Massachusetts personal lines automobile insurance market.
The onset of managed competition on April 1, 2008, raised questions whether Commerce could continue its success in a more normal market environment. Some said that the sale of the company to the Spanish insurance conglomerate MAPFRE in 2008, evidenced that the owners who had so successfully managed Commerce before there was open competition thought that it might be able to compete.
Over the next six years, Commerce’s market share has declined from over 31% to 26.09% as of the end of 2013. Likewise its premium volume for Massachusetts personal lines auto went from over $1.6 billion in 2007, the last full year before the introduction of managed competition, to $1.1 billion in 2013. However, Commerce still commands the major market share in Massachusetts personal lines auto insurance even though it competes with 53 carriers today as opposed to 23 carriers in 2008.
Commerce does not plan, however, on waiting until its auto personal lines market share reverts to the proverbial mean before taking action to boost its premium base.
New initiative into life insurance through a 2% discount on auto insurance
Commerce has now announced that it has initiated the co-marketing of term life insurance to develop new lines of business that complement its dominant position in the Massachusetts personal lines automobile insurance market.
Commerce is seeking to leverage its marketing clout in the Massachusetts personal lines market by offering life insurance to its customers in conjunction with the company’s network of independent agents throughout Massachusetts. The life insurance product is offered through MAPFRE Life, a member of the MAPFRE USA Group.
The first offerings are very vanilla 5-10-15-20 year term life insurance products with a relatively low maximum death benefit of $200,000. Consistent with Commerce’s target market of its auto insurance customers, the term product has no medical exam and online applications or applications submitted at a Commerce independent agents’ office. Whether marketed directly by MAPRE Life or through a Commerce agency, the agents receives the commission.
As an additional inducement to its substantial customer base in the automobile insurance market, purchasers of Commerce’s new term product can receive a 2% discount on their Commerce auto insurance policy.
Life Insurance is a lucrative but crowded field in Massachusetts
At the end of 2013, there were 292 insurance companies writing life insurance, exclusive of annuities and deposit products, in Massachusetts. These companies generated direct written premium of $3,711,160,756. The market is somewhat concentrated with the top 20 companies listed below writing 68.2% of the premium, or $2,530,820,573.
The remaining 272 companies wrote 31.8% of the premiums, or $1,180,340,183, or just over what wrote as personal auto premiums in 2013 ($1,119,180,655).
|Company||Massachusetts premium 2013||Massachusetts market share 2013|
|Northwestern Mut Life Ins Co||$542,669,931||14.62%|
|Metropolitan Life Ins Co||$258,388,484||6.96%|
|John Hancock Life Ins Co USA||$194,917,257||5.25%|
|The Savings Bank Life Ins Co Of MA||$174,066,709||4.69%|
|New York Life Ins Co||$162,001,841||4.37%|
|Guardian Life Ins Co Of Amer||$158,478,474||4.27%|
|Massachusetts Mut Life Ins Co||$142,216,753||3.83%|
|Lincoln Natl Life Ins Co||$141,012,917||3.80%|
|Prudential Ins Co Of Amer||$111,159,617||3.00%|
|Pruco Life Ins Co||$93,088,420||2.51%|
|MetLife Investors USA Ins Co||$82,770,645||2.23%|
|Hartford Life & Accident Ins Co||$63,894,925||1.72%|
|New York Life Ins & Ann Corp||$63,186,907||1.70%|
|Minnesota Life Ins Co||$55,516,093||1.50%|
|Pacific Life Ins Co||$55,122,689||1.49%|
|RiverSource Life Ins Co||$50,154,579||1.35%|
|American Gen Life Ins Co||$47,797,329||1.29%|
|Reliastar Life Ins Co||$45,647,584||1.23%|
|Transamerica Life Ins Co||$45,383,565||1.22%|
|Genworth Life & Ann Ins Co||$43,345,854||1.17%|
Commerce has stiff competition to sell life insurance but its parent is a large global player in life insurance
There’s no doubt that MAPFRE life and Commerce insurance have their work cut out for them in the competitive life insurance market. However, the parent company MAPFRE, S.A., headquartered in Madrid Spain, is a major global player in life insurance as well as property-casualty insurance.
In 2013, MAPFRE, S.A. wrote 23.5 billion Euros of premium or about $31.7 billion. Of this amount over 21%, or over $6 billion, came from the sale of life insurance.
The backing of such a well-funded and experienced parent company ensures that Commerce can make a determined and well-financed effort to successfully expand into life insurance by exploiting its still-dominant position in personal lines auto insurance.