August 27, 2009

Why Inner City Agents Are Threated By Auto Insurance Overhauls

Over 100 inner city auto insurance agencies face closing their businesses because of an overhauled auto insurance plan that threatens their livelihood and that of 230 employees throughout Boston and surrounding areas. In the 1970s, a system was set up, mainly in inner city and low-income areas that provided specialized auto insurance coverage for drivers that were deemed high-risk. The recipients of this plan were mostly minorities and immigrants who were denied coverage and cheap auto insurance by conventional agencies. Special agents were set up exclusively for the purpose of writing low-cost auto insurance policies for drivers that would end up in the state’s pool for high-risk drivers, or those that were prone to high auto insurance rates.

We took on all comers who walked through our doors, said Marie -Armel Theodat of Theodat Insurance Agency, who in the late 1970s helped her father Roussel Theodat build the successful business in the low-income Codman Square section of Dorchester. These days, she runs the agency along with three employees. ‘Everyday is like a challenge, she adds. Like a lot of the agents would say, we are hemorrhaging right now, and everyday is just one day closer to closing our doors.’

Under the old system, the Exclusive Representative producers or ERP were instrumental in getting high-risk drivers into an industry pool called Commonwealth Automobile Reinsurers. The new system, christened the Massachusetts Automobile Insurance Plan, seeks to build direct relationships with inner city drivers rather than having them assigned to a state-regulated pool. The goal is a reduction in accidents and traffic violations. Nonnie S. Burnes, Insurance Commissioner, said ‘The Division of Insurance has named an ombudsman to work with these agents to help them find voluntary contracts, and succeed in this new market. As we have worked with these agents, we have heard their concerns and addressed policies such as lowering the down-payment for consumers and changing pre-registration procedures to create a better environment for both agents and consumers.’

Agents said certain insurance companies that promised those contracts reneged. ‘We spent all those years writing the business nobody wanted to touch,’ said Paul D. Wasgatt owner of Safeside Insurance Agency in Worcester. ‘We dealt with the companies, we wrote the policies with low limits nobody else wanted. Now the insurance companies are saying, ‘too bad, you can’t have a contract.” Another concern deals with the fact that many minorities and immigrants move frequently, and will not be notified of the changes, thus causing many uninsured drivers. Add to that, the effect this change will have on low-income and minority communities that include Boston, Springfield, Lowell, Lawrence, New Bedford, and Brockton. These businesses were active in community support, sponsoring street fairs, little-league teams, and various other activities.