The John C. Gallagher Insurance Agency has been selling auto insurance on Dorchester Avenue for over 50 years in a former dining car beside the Fields Corner subway station. First as an assigned risk broker, then an ERP and now an urban agent with a voluntary contract, the Gallagher Insurance Agency has seen it all when it comes to the ups, downs, ins and outs of the Massachusetts automobile insurance marketplace. Agency Checklists got a few moments with Mr. Gallagher in between customers to wax philosophical about the MAIP, managed competition and what he would do if he were the Commissioner of Insurance.
Tell us about the history of your agency and how your family got into this business.
Well, the family history in the insurance business actually goes back a really long time. My grandfather came from County Donegal in Ireland and when he came here, he started off as a debit insurance agent – a debit life insurance agent with Metropolitan right here in Dorchester. I think that’s part of the reason that I feel connected to the populations that are here. He went on to become an attorney then a state representative. In the Legislature, he was known for being an expert on insurance. He stayed very involved in insurance issues throughout his entire career and had two sons, my uncle Thomas Gallagher, and my father, John C. Gallagher, who both became insurance agents in the early 1950’s. My uncle’s agency was in Roxbury and my father’s this one here in Dorchester. This agency started right here in 1956 and we are still here in Dorchester in the same place.
You have a CLU designation which seems a little strange for an auto insurance agency.
I started off as a life insurance agent. The GI Bill enabled me to become a CLU, which is a designation for a life insurance agent. I had a small insurance agency in Milton, which was a primary life insurance disability with a small property casualty aspect to it from 1969 until 1982. In 1982, at the time my father became ill, I brought my agency over here and pretty much concentrated in the business of my father’s agency because property-casualty agencies in Dorchester are very consuming. So I left behind the life insurance and the disability and just focused on the property casualty business.
We have to talk about the building. It’s not your typical insurance agency office is it?
This agency, the physical structure itself, is an odd little place, essentially a glorified trailer. It actually came in here on wheels many many years ago, as legend has it, as a chuck wagon. They used to drive cattle down Dorchester Avenue and this place came in those days. It was a diner at one time too and in that there’s a certain comfort level.
People like to drop in…
…People are comfortable the minute they come in the door. They don’t feel intimidated by anything in here and we obviously, we don’t try to intimidate anybody in any fashion, or from the standpoint of being in a magnificent structure. It’s like their home I think. And I think there’s an element of that that’s actually effective. There’s that personal contact, anybody that comes in the door can talk to me in one second. We don’t have any levels of bureaucracy that you have to go through. If anybody has a problem, they go right to the top without any question about it and they know that.
You write mainly auto correct?
We write some FAIR plan insurance, we write some homeowner’s insurance. It’s an area that we’re trying to develop, more so with my son working in here. I’m hopeful that maybe different lines of insurance could be marketed through here.
So who in the family still works the family agency?
Well I have a brother who works with me. He’s a licensed insurance agent. I have a son, Michael [the fourth of his five children] who graduated Providence College who’s taking his insurance exam in the beginning of August, and I have a wife who’s also a licensed insurance agent who works in here from time to time as well. So that is our staff.
You don’t have a website.
I don’t have a website, no. I don’t want one either.
You don’t want one? Why?
I don’t know that it would enhance my marketing. I think that we’re really sort of a highly visible kind of an agency and we’re a small agency. We’re in a situation where a lot of the business we get comes by referrals, it comes by just observation, people around here, it’s such a densely populated area. Technology is important and obviously we have an agency management system here. We’re on- line with a couple of companies – with that kind of internal technology, we do pretty well. But, I’ve never used it for a marketing strategy at, at all. I’ve just felt that the internet puts your name in front of consumers, but our name is already in front of most of the consumers we’re looking for.
I’m just not sure what it would do for our agency. I’m not particularly interested in attracting a lot of people who are price shopping. I’m not looking to become part of the race to the bottom kind of mentality. This is a very parochial probably but for me and this agency, this environment provides for all of our needs. We’re primarily marketing automobile insurance. That’s a primary goal so that, you know, if somebody’s looking to find different types of insurance, I just don’t know that a website is going to do us much good.
What are the demographics of the urban market from where you’re drawing from? Is it all just in your neighborhood?
It’s either in the neighborhood or it’s with referral kinds of situations where we have customers that are maybe living in, in Hyde Park for instance, or maybe Randolph and they’ll come in here because their friends are insured here, their brother is insured here. So we have pretty good base and we’ve been here selling insurance for a long time. So I think we have a lot of good will that exists and we have a lot of connections to a lot of different people through those contracts.
What exactly is an “Urban agent”?
They were typically agents located in economically disadvantaged areas or oftentimes in immigrant or minority areas. They were high potential loss places and places that were sometimes perceived as being unattractive from an underwriting standpoint. They also were seen as high risk, high crime kinds of areas but, they’re really areas of market need so a lot of times agencies developed in these areas, similar to this particular agency, to serve that market need.
But there are some agents in Dorchester who wouldn’t be considered urban agents, is that correct? Or would you consider all of them urban agents?
I guess at this particular point, we’d all be urban agents in that regard. But, traditionally, there were two somewhat parallel universes going forward. A lot of times when we’re talking about the urban agents today, I think we’re really thinking in terms of the old assigned risk agency. A lot of today’s urban agents were the former ERPs and the old assigned risk agencies. And so they differ from other agencies operating in the inner city who happened to be voluntary agents.
With the assigned risk agencies typically there’d be a counter, customers just walking in and buying insurance and there wouldn’t necessarily be a tremendous relationship or rounding of accounts or anything of that nature.
You still have a counter. How many people do you service in a day on average?
Many days we service as many as 50 people in person, with various needs, and countless phone contacts.
Is there an urban agents association?
There is an urban agents association as a matter of fact. The Mass Urban Agents Association.
What is its purpose? Are you involved in any way with the association?
I don’t have a role in that organization but I belong to it and many of the people are former ERPs and some of the people still are agents who do not have voluntary contracts. We meet on maybe a monthly basis or something of that nature. It’s a good mechanism I think whereby those agents can communicate through that organization, they can communicate with CAR, there’s some people there that are on different boards and the governing committee of CAR or the attorney general’s office. It’s become a good forum for people to gather and just discuss common issues. I think anybody’s eligible to join it and there are not just insurance agents, there are other people from different companies too, like glass companies or people who are trying to market something through the inner cities and, so they come here to.
In my own situation, I tried to become a better agency to be attractive as a voluntary agent. But, I could just as easily not have gotten a voluntary contract and so I’d like to try to help other agencies like ours be successful too.
What are the biggest systemic problems that your customers are experiencing right now with the MAIP?
As far as the people I’m seeing coming in here, I’m not seeing really any systemic kinds of problems. I think the MAIP is working out quite well. I mean, we have a very narrow focus in that regard but, I’m not seeing a systemic problem right at the moment.
So, there’s no actions or anything that you see coming out as a result of the implementation the MAIP that maybe weren’t intended but that nevertheless are affecting your customers?
Well, there were concerns that I had. One of the concerns that I had was that at the end of the three-year assignment period that companies would just start to uniformly non-renew everybody. My concern was that all companies would just immediately stop renewing those risks because they were the original assignment they had and they didn’t want them. But what’s happening though, is that these insureds stay on the books for the three years and if they’ve demonstrated a certain consistency, they’ve been paying their premiums, they haven’t been cancelled. They [the insurance companies] tell me that it’s a good chance to take a look at them and oftentimes that particular risk that’s made it through the three years is much more attractive than the risk that they would be assigned currently.
The other big issue that I was very concerned with was the issue on the ownership of expirations. The concern I had was that if the agents didn’t own the expiration that would be very harmful to anybody who puts a lot of business into the MAIP. All the former ERPs would have been really basically put out of business. But fortunately, you know, the Mass Agents Association and then Frank Mancini [the President of MAIA] got behind it and the Governor signed the bill that gave the ownership of expirations to the agents and I think that was like a tremendous victory for all insurance agents but in particular for the urban agents because it basically kept them from being obliterated by the system. So those are two really big issues I worried about.
You often speak at CAR.
Why? What do you hope to accomplish?
This agency’s been in business for a long time and we’ve really been part of this community for a long time. We’re in an epicenter of the urban environment and when I see things, I see them sometimes from a longer perspective and so I speak because I’d just like to see the system be fair to the people that are here. I believe that the agencies, like this agency, really are a fabric of America basically. We’re a fabric of the cities and so we have to speak out for people who oftentimes don’t have a chance to speak out. I feel like if I get up in CAR and I say that there’s something that’s taking place that I don’t think is fair, I feel good about that. I do it with somewhat of a community activist kind of a mentality and I do it for that reason. But, I also must say that I also believe anything that we could do to help the consumers in Fields Corner, the consumers in Dorchester, makes our agency better as well. So when I speak at CAR, I’m, not necessarily speaking just for John Gallagher, I’m speaking for Mr. Jones who just happens to be living down the street. I’m saying something for him too.
What kind of reception do you get being an urban agent?
Well, I’ve always felt welcomed. I’ve spoken at CAR and the Insurance Division and at the State House for that matter, and I’ve always felt that I’ve had a fair hearing. The people that are responsible for those organizations and the leaders in those organizations, I’ve felt have always been very interested, like the attorney general’s office for that matter.
So do you see the MAIP, the present assigned risk plan, as simply a return to the same system as the original assigned risk Massachusetts had up to the 70s?
I think it’s a much better system.
What’s better about it?
The MAIP system is very streamlined, it’s instant. It’s a far superior system than the old assigned risk system. There’s no comparison really. The old assigned risk system was a very cumbersome, slow system. This is before the days of the ERPs when you’d have to go down to Batterymarch Street to get assignments. There were tremendous delays there and a tremendous end of the year crunch for people getting their insurance, getting their license plates. It was a very archaic kind of a system.
So it can better differentiate between the clients you have?
Exactly. Urban agencies in the city have two different qualities of clients I think. Some of the clients that walk in the door are hard working, safe driving individuals. And they’re interested in buying the best insurance product that you can offer and when they can qualify themselves for lower rates by their driving histories. By the same token, you have other people that come walking in who don’t seem to have any regard for driving characteristics. They basically just want to get their plates and you look at their driving history and they’ve had multiple accidents and claims. It’s a different – it’s a whole different mentality.
But, over time, however, those same accounts becomes aged and the client goes from being 18 years old and not caring about anything to being 25 years old and suddenly feeling responsible. So there’s an evolution that takes place in many of these clients. Sometimes a person that was a bad client becomes a very attractive client in the future. The business that’s written in the MAIP, typically those are the people that really don’t care about their driving characteristics. They’re not concerned for other people and most of the time I think they belong there.
Care to elaborate more?
In the past when there was the take-all-comers law, everybody that came in was eligible for insurance. So it had a tendency to make those agencies that opened up on a corner and serviced anyone who came up to the counter as unattractive to the industry in general because you’d have high loss ratios. They’d be no way of categorizing who is a good risk, who is a bad risk. Those agents with the walk-in type of the businesses had high loss ratios and tended to be in credit eligible territories where a lot of loss activity was going on all day and the rates then really weren’t reflecting that. So, they became very unattractive I think.
What’s happened now is that because of the MAIP, it’s similar to the fair plan and the voluntary homeowner’s market. With the MAIP, insurance companies can make their own underwriting decisions as to what kind of business they have an appetite for. And so urban agents, myself being one of them, now have the capacity when an insured walks in the door, if he happens to be a very bad risk from an underwriting standpoint, lots of points, lot of accidents, then that person can go into the MAIP. And another person that would qualify as a voluntary type of risk, we could put that one right through our company, which is Tower Group Mass Homeland, and they would write them voluntarily. And the long-term benefit of that is that the ones that we write voluntarily, they get to have all the benefits of the voluntary market. They usually have a lower rate and they have different relationships with the company. They don’t get non-renewed particularly. It’s an evolving kind of a system and is really working out to the benefit, I think, of the good urban driver who in the past was always just subjected to the assigned risk stigma and the higher rate.
Let’s talk about which assigned risk carriers do you see doing a good job in servicing assigned risks?
Well the first one I’d have to say is obviously Tower Group. They’re the ones that gave us a voluntary contract.
We were ERPs with them for many years so I’m very grateful to them. They’re superb. Their technology is excellent. Their billing is excellent. We never have a problem with claims with them. I find them to be consumer oriented. I find them to be agency oriented. I can’t say enough good things about them.
We’ve had a very good relationship with Commerce Insurance and Safety Insurance because both of them have allowed us to use their technology. Commerce has CGI which is what we have with Tower Group, so it becomes very easy for us to handle that. And their payment plans are very easy for us to work with – Safety Insurance as well. Safety has let us use their technology for ordering coverages and things like that and it’s just, it’s instantaneous.
And the other company that I’d really like to say something about is Pilgrim Insurance of all people – which is really a servicing company. From what I can see, it does a beautiful job of servicing the accounts, doing things correctly, for responding, everything about them. Also I think Tower Insurance is an excellent company. Those are companies I’d say.
Any servicing carriers that leave room for improvement?
I haven’t had any difficulties with any companies as far as being non-cooperative or treating me like a second-class citizen or anything like that. I feel that all the insurance companies we see because the way the assignments go, most of them go to the bigger companies anyways so I don’t have too many contacts with some of the smaller companies. But I haven’t had any complaints with the MAIP. I think the companies have done a wonderful job and I think a lot of the credit goes to CAR. [It] was fabulous with the implementation of the MAIP. And I also think the Insurance Division, the Attorney General, and the Mass Agents Association have done wonderfully with it too. They’ve worked together to benefit the consumers. I was very concerned going into this. I thought that this was going to be a terrible, terrible thing. But actually, I have to say I’ve been very pleasantly surprised with the way it has worked out.
For a long time you did not do premium finance risk. How is it going?
Well, it’s going very well, as a matter of fact. As competition has come along in this business, as I said, we try to be narrowly focused here and it’s been my feeling that if we want to be providing automobile insurance to people, then we really have to do everything we can to make us a very attractive agency for them to buy insurance. A lot of agencies who are growing now are growing really at the expense of somebody else because there just isn’t a lot of expansion taking place. I was afraid that by doing financing it [the agency] would become so overwhelmed with paperwork and issues like that it would just choke the rest of the business. But, when I learned that between the agency management system we have and the technology available through the finance company I realized it was actually something that was very doable. And, it has really worked out wonderfully actually and been very good for the customers because it gives them options that they wouldn’t have otherwise.
If you were the Commissioner of Insurance, would you change anything about the MAIP or managed competition in general?
Well, a couple of little things. The first thing I would change is that I would try to encourage companies to offer the exact same billing options to everybody. Now some companies won’t give the EFT to people in the MAIP. If you buy a policy in the MAIP and you want to have the EFT automatically taken out of your checking account, some companies won’t let you do that. And it’s unfair because you’re supposed to be treated equally and many times we’re talking to people who are really struggling to make ends meet. So by using EFT you get 12 monthly payments instead of maybe 9 or 10 and you don’t get a service charge and it seems like a small thing but it can be big to a consumer. There’s no monthly charge, you have more payments themselves, usually the renewal down payment is lower and it’s just going to one twelfth of the year rather than 20 percent or whatever – it’s a good thing – I don’t see what the problem is.
And the other thing I would do if I was the Commissioner I would try to encourage insurance companies, or to somehow reward them for giving contracts to those agents that don’t have them and sell it as a consumer-oriented benefit rather than an agency benefit. Once an agent has a voluntary contract then he has a certain percentage of business that really should be in the voluntary market. Even the agent that has a very high loss ratio, if he has 500 accounts for instance, at least 50 or 100 of them should be in the voluntary market. Every agent should have some kind of access to the voluntary market.
I believe that Safety insurance has been creative in trying to help some agents in that regard. Say you were 99 and 98 and you’re an attractive account, I think that even some agents who don’t have voluntary markets are able to broker stuff, broker things now through Safety. Which is really a step in the right direction but, there should be more of that out there so that people don’t end up in the MAIP who the agent knows shouldn’t be there. So I think that the Insurance Commissioner should maybe try to find more ways for every agent to have more access to the voluntary market.
Where do see the MAIP and Managed Competition over the next five years?
I think the agents will continue to play a really dominant role in this marketplace going forward. Obviously direct writers are going to be part of this marketplace but automobile insurance can be a very complicated kind of an issue. We have a parade of people coming in here who have had insurance with some of the big direct writers who ask us to help them fill out their title forms and all kinds of things like that.
Do you help them?
Sometimes – depending how altruistic we’re feeling at the moment. But, I would say a lot of the business we’re writing now are with people that have been insured with Progressive or GEICO. They come in here because they’ve got cancelled for one reason or another.
As far as competition, well they are always going to be here and I think we agents already sort of weathered a lot of the storm with the direct writers. There are many needs, certainly in the inner city. People really need to have an agent who can help them with some of the issues that come up. It’s just really impossible for many of the people that we insure to actually navigate the shoals that exist out here in this marketplace so going forward I think that’ll be the key.
There’ll continue to be price pressures, but I think that prices are going to have to go up. As I said earlier, none of us want to be in a race to the bottom. We can keep lowering prices, lowering prices, lowering prices, and everybody can go out of business. The truth is is that we’re offering a very valuable service. We’re offering – most of the times we’re offering a location where the consumers can go, we’re available to them, agents have the knowledge of the system. We’ve got many many advantages in our favor.
One of the problems I think is that we’ve somehow equated competition with price. Everybody comes walking in saying we want competitive prices. Well, what does competition really mean? I mean, price, for most consumers is really a secondary kind of a thing. If say, I’m looking for a physician, I’m not really shopping around to see which physician is charging me the least. What I really want is a physician that I feel like I have a relationship with, who I think is on my side. I mean, that’s really what’s the important thing is – providing a service.
The consumer needs to recognizes the value of the agent, which the agent somehow needs to communicate to his clients that so the consumer realizes it’s not just a matter of price. We have people who come walking in here and they make a comment I can do this, that or the other thing, and we’ll tell them what we offer them. We’re here, we’ll help them out, we’ll help them with their payments, whatever they have, whatever needs they have and we’ll do our best. If that’s not good enough, then eventually we’ll go out of business because we’re not giving them something that they need. But I think, I believe that they recognize that and they’ll probably recognize it even more so because this is a very complicated insurance environment in Massachusetts and until you actually have a problem you don’t realize what you’re missing. And, and I think it’s as simple as that.