Unfazed by caveman, Fels eager to get back to business

Commerce Group chief executive Gerald Fels, 64, oversees a company that provides auto insurance for nearly a third of the state's cars. The company has done very well under the existing regulatory system, where state officials set all auto insurance rates. But it now has to adapt to what the state insurance commissioner is calling "managed competition," which would allow carriers to set their own rates subject to regulator approval . Fels spoke to Globe reporter Bruce Mohl at his office in Webster.

Q What do you think of the Geico caveman? It sounds like we might be seeing a lot more of him around here.

A It's not my kind of commercial. From our marketing standpoint, I wouldn't want to characterize our customers that way.

Q What's wrong with that kind of advertising?

A Obviously it works, but our distribution model works a bit differently. We distribute our products through independent agents. We've always felt that when someone buys insurance, it's a serious purchase. We try to make sure the coverages they buy are the right coverages for their lifestyle. That's far more important than having catchy phrases or a strange character.

Q Your company has fought against change here for years. Why did you throw in the towel after Massachusetts Insurance Commissioner Nonnie S. Burnes announced her move to managed competition last month?

A At some point in time you say enough is enough, let's get back to doing business. The public policy debate, as far as I'm concerned, is concluded on this matter.

Q Has anything else changed?

A The overall climate has changed. We certainly are far more comfortable with the current governor than we were with the last governor. We have a new governor, a new insurance commissioner, a new attorney general. There's going to be adequate protection there for consumers.

Q What's your biggest concern now?

A Right now it's really the possibility to make a misstep. We have a lot of new players involved, both in the public sector and the private sector. We're dealing with a new crop of company leaders that really, in my opinion, don't understand the marketplace too well.

Q What kind of misstep are you worried about?

A It's more the way companies are going to compete, how they're going to price their product, which people they want to insure, which people they don't want to insure. It's all kind of brand new to them.

Q How will Commerce fare under competition?

A We're pretty comfortable in terms of where we are today. We have a sizeable footprint. Of the companies currently operating in Massachusetts, we're the most efficient. We can turn out a policy at a lower cost than our competitors can do it.

Q The commissioner says she is skeptical of using socioeconomic rating factors like homeownership, credit background, occupation, and education to set rates. Do you want to use those factors?

A If they become available in Massachusetts, we'd use them like the rest of the industry. Anytime you can get more information, it's always helpful from an underwriting standpoint.

Q The industry has indicated claims and rates are headed down next year. How much will rates go down?

A I don't really know how much more there can be in terms of rate reductions. We're seeing loss cost dollars going up. Some people are going to have savings, probably. Some people are going to have to pay a little more, based on their driving experience. It's premature to say that the average rate in total is going to go down substantially.

Q Why would losses start heading up?

A What comes to mind is the economy. There's a lot more economic activity going on, so you have far more people on the road and that would certainly tend to increase claims cost. Also, the weather has been a little worse this year than it was last time around.

Q How's your driving? Ever had an accident?

A I've had a few minor collision losses, backed into a few things. Nothing major.

Q What's your secret for keeping your premium reasonable?

A Fortunately, I can afford a much higher deductible than most people can, a $1,000 deductible. Again, it comes down to buying upfront the right type of policy for you. If you can afford it, and you're a good driver, a safe driver, that's money in the bank.

Q Are you planning to retire at age 65?

A Not at this juncture. I have to see this through.