On September 20, 2012 CAR submitted to the Division of Insurance, and interested parties, its proposed amendments to Rule 37 of the CAR Rules of Operation. The changes mainly affect Assigned Risk Producers (ARPs) who place private passenger risks through the Massachusetts Automobile Insurance Plan (the MAIP). On October 23, 2012, these rule changes were automatically approved when there was no request for a public hearing on the matter and the Commissioner of Insurance took no further action on the issue within the 30-day period following the filing of the amendment.
The Proposed changes to Rule 37 will modify the existing commission payment structure to Assigned Risk Producers. In a letter announcing the changes, CAR President Daniel Judson said that “…incorporating the commission schedule in the Rule will provide transparency and assure that consistent compensation of Assigned Risk Producers among all Assigned Risk Companies will be achieved.”
A quick run-down of the changes to Rule 37 and what Assigned Risk Producers should know:
- An Assigned Risk Producer will be paid the same commission for a risk insured through the MAIP before October 1, 2012 as a voluntary risk. These commissions are paid in accordance to the the private passenger insurance rates on file at the Division of Insurance.
- ARP’s with risks insured before October 1, 2012 who do not operate under the American Agency System will be paid the same average commission as any other agent operating under the American Agency System.
- For policies on or after October 1, 2012, a deciding factor for commissions will be whether or not an ARP has a private passenger automobile contract with an Assigned Risk Carrier. If a contract exists between the parties then the commission payments pursuant to that contract will take precedence regardless of the rate of the risk or whether it is was issued voluntary or through the MAIP.
- ARPs issuing policies on or after October 1, 2012, who have no existing private passenger automobile contract with an ARC, will now have their commissions paid pursuant to the commission schedule below.
- If an ARP is not operating under the American Agency System, that ARP’s commission compensation will be calculated the same as an ARP operating under the system in accordance with the rest of the modified Rule 37.
|Merit Rating Codes for Rated Operators||Base Commission Percentage|
|All Rated Operators have Merit Rating Code = 99||13.0%|
|All Rated Operators have Merit rating Code = 0, 98 or 99||12.0%|
|At Lease One Rated Operator has Merit Rating Code = 1-4||10.0%|
|At Least One Rated Operator has Merit Rating Code = 5+||10.0%|
Note that this new MAIP Commission schedule will apply whether or not a voluntary of MAIP rate was used to issue the policy and that the commission rate is determined at the issuance or a new policy or renewal of a policy. An adjustments to a commission rate will only be made as the result of an endorsement with the same effective date as the policy and only if such endorsement would affect the commission percentage. Mid-term policy endorsements will not be considered for a commission rate adjustment.