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You are here: Home / Market Share Reports & Industry Trends / CAR Market Share Reports / The State of the 2018 Residual Auto Insurance Market Courtesy Of CAR

The State of the 2018 Residual Auto Insurance Market Courtesy Of CAR

November 27, 2018 by Owen Gallagher

Commonwealth Automobile Reinsurers, (“CAR”) is the statutory body established by Massachusetts General Laws c. 175, § 113H that administers the Massachusetts Automobile Insurance Plan for personal motor vehicle insurance and the joint underwriting association for commercial motor vehicle insurance including taxis and limousines.

CAR also acts under an agreement with the Division of Insurance as the state’s statistical agent for motor vehicle insurance.

CAR’s fiscal year runs from October 1, of each year until September 30, of the next year. After the end of each fiscal year, CAR’s Governing Committee issues an annual report. The latest report which relates to the period from October 1, 2017, to September 30, 2018, can be accessed from the link following this article.

For those interested in a simple synopsis of the report, however, Agency Checklists has abstracted the main points of interest from the report below.

Commercial Automobile and Taxi/Limousine Programs

CAR manages the commercial residual market pooling mechanism through its Commercial Automobile and Taxi/Limousine Programs. Servicing Carriers are contracted to service the ceded policies of both programs for 5-year terms, the books of business are reviewed annually to ensure an equitable distribution of the residual market. Members share in the pooled results based on voluntary commercial written premium.

Financial chart, courtesy of CAR

This fiscal year saw initiatives to address the declining results in the commercial automobile residual market (See Projected Financial Results to the right). The Commercial Automobile Residual Market Standards Subcommittee and Commercial Automobile Committee introduced initiatives aimed at reducing:

  • “the observed migration of interstate truck and bus operations to Massachusetts to pursue insurance coverage at favorable rates;” and,
  • the “significant number of non-fleet private passenger type risks that have sought coverage in the commercial residual market in an apparent effort to avoid merit rating impacts or to secure insurance coverage where they would not otherwise qualify due to licensing restrictions.”

These committees initiated a CAR Rule change that incorporated a “nerve center” test as part of the definition of Eligible Risk in Rule 2 of CAR’s Rules of Operation and created standards to determine an applicant’s Principal Place of Business, including a certification form to be used in evaluating and confirming eligibility.

CAR also established standards to be employed by Servicing Carriers and producers to determine whether a non-fleet private passenger type risk is eligible for placement in the commercial automobile residual market. Also, CAR developed a certification form requiring applicants to attest to the validity of the business entity they are seeking to insure.

Also, to oversee the entire commercial automobile program, CAR established the Commercial Program Oversight Committee to monitor the progress of various committees charged with specific components of the program.

The Private Passenger Market and the MAIP

CAR administers the Massachusetts Automobile Insurance Plan (MAIP), which provides access to private passenger motor vehicle insurance to eligible risks who are unable to obtain such insurance through the voluntary market and ensures that the risks written through the MAIP are distributed equitably based on the quota share of each Member.

Company listing, courtesy of CAR.

During the fiscal year 2018, the size of the private passenger residual market administered by CAR fell to 1.25% market share while the total market continued to grow at a modest annual pace. The top ten carriers continue to capture more than 80% of the total private passenger insurance market as shown by the ranking to the left.

The 2018 present market share percentage of the residual market of 1.25% contrasts with the 4.3% percentage residual market share before the start of the MAIP and managed competition in 2008.

Statistical Agent for the Commissioner of Insurance

From left to right, Peter McCabe, Vice President of Technical Operations, Natalie A. Hubley, President of CAR, and Wendy Brown, Vice President of Business Operations. (Photo courtesy of CAR).

As the designated statistical agent for Massachusetts automobile insurance, CAR collects, edits, analyzes and disseminates Massachusetts motor vehicle insurance statistical data as directed by the Division of Insurance. In its role as statistical agent, CAR verifies the completeness of the statistical database and reconciles reported statistical data to company financial statements and performs an analysis that compares each company’s distribution of data to the industry’s distribution.

Information Technology Enhancements

Consistent with CAR’s role as the state’s statistical agent, CAR’s Information Technology Group (“IT Group”) has during the fiscal year 2018 enhanced the functionality and efficiency in support of several commercial automobile program components including:

  • expanding Servicing Carrier Profile and Producer Management applications;
  • automating the SIU portion of the Compliance Audit program; and,
  • rewriting the Commercial Cession System as a website application.

The IT Group also completed the construction of its disaster recovery infrastructure this fiscal year. The new “Disaster Recovery as a Service” configuration is designed to allow CAR to continue to perform its business functions following an event that makes CAR’s on-site information unavailable.

Annual Report Recognizes Sumner Gilman’s thirty-two years of service

This year’s report recognized Springfield agent, Sumner D. Gilman’s, thirty-two years serving on CAR committees. On July 1, 2018, Mr. Gilman stepped down from CAR’s Governing Committee, and CAR’s Annual Report expressed CAR’s sincere appreciation for his contributions of time and professional expertise in support of the organization.

Mr. Gilman first joined the CAR Governing Committee in 1986. He served as the Governing Committee’s Vice Chair in 1995-1996 and as Chair in 1997-1998. During his tenure, Mr. Gilman participated in addressing the sometimes contentious issues facing the Massachusetts residual automobile insurance marketplace including:

  • depopulation efforts of the late 1980s and early 1990s:
  • rebalancing of the residual market burden among Member Companies during the mid-1990s;
  • introduction of the Taxi/Limousine program later in that decade; and,
  • implementation of the Limited Servicing Carrier Program and transition to the MAIP in the managed competition environment.

For those interested in learning more about Mr. Sumner’s career in the Massachusetts’ insurance industry, please refer to Agency Checklists’ 2016 interview with him entitled,”Still With A Drive To Succeed: Sumner Gilman On Mass. Agents, CAR and Why Premium Financing Is Still A Good Bet.”

In the report, CAR also expressed “its sincere thanks to Mr. James S. Hyatt, whose term as Governing Committee Chair is coming to a close.” The report recognized Mr. Hyatt’s efforts in meeting the unexpected challenges of CAR’s office relocation and disaster recovery projects as well as confronting and addressing problems with the commercial insurance residual market.

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