Massachusetts: Insurance Commissioner Moves to Give Consumer Lower Rates, Greater Choice, and More Protections; NAMIC Comments

Seeking to give Massachusetts drivers more choice and lower premiums, Insurance Commissioner Nonnie S. Burnes filed a decision on July 16 calling for the gradual introduction of competition in the Massachusetts auto insurance market.

Transitioning to managed competition, where the commissioner will retain strong regulatory authority to protect consumers from excessive rates, will benefit consumers with good driving records regardless of where they live and allow insurers to introduce competitive and improved products to better serve drivers throughout Massachusetts. Consumers will be able to take advantage of competitive rates for policies renewing on or after April 1, 2008.

“Taking gradual steps to introduce competition to the auto insurance market will have a positive impact on consumers across Massachusetts,” said Burnes. “Drivers stand to realize benefits ranging from lower rates to greater product choices and the market place itself will be infused with more stability and capital.”

“In the context of the Massachusetts auto insurance system, this decision represents a very significant step toward a system that is characterized by more competition,” commented Paul Tetrault, NAMIC’s Northeast state affairs manager. “NAMIC supports regulatory modernization, including measures to establish and enhance competitive rating, as instrumental to reforming the existing system of state-based insurance regulation.”

Tetrault noted that Burnes conducted a thorough review of the history of the market and decisions by her predecessors going back three decades and concluded that current market conditions applied to the statutory framework essentially dictated a conclusion that rates should not be fixed and established.

“This decision is a first step that will be followed by a process to implement competitive rating in Massachusetts,” Tetrault said. “This process will determine the degree to which this initial decision produces competitive benefits for insurers and consumers alike.”

In March, a seven-member study group appointed by Governor Patrick found that the current system whereby the commissioner sets auto insurance rates is “ailing, and that some form of competitive rating is essential to attract and retain insurers to write this line of business in the Commonwealth.” Nineteen insurers currently write auto insurance policies in Massachusetts. Since 1990, 35 companies, including national carriers, have left the market.

“Commissioner Burnes has done an excellent job reviewing the facts and evaluating the arguments on both sides of this issue,” said Consumer Affairs and Business Regulation Director Daniel C. Crane, who chaired the Governor’s Automobile Insurance Study Group. “Her decision conforms to the objectives outlined by the Study Group, including moving toward controlled competition to increase product choice and lower rates for many, while maintaining many of the existing subsidies for urban and inexperienced drivers. The course she has chosen is a prudent one and, I believe, in the best interest of consumers across the Commonwealth.”

Burnes will establish a regulatory framework soon to guide the transition to managed competition, outlining parameters within which companies can set rates. The Commissioner will view with “extreme skepticism” insurers who propose to base rates on socio-economic factors, including education, occupation, home ownership or credit scores. She will retain her statutory authority and regulatory power to disapprove rates before they become effective, prevent rates that are unfairly discriminatory and step in after rates take effect if they appear excessive in any given territory.

“Prior to issuing new regulations, I will hold a hearing to give consumers, industry representatives and all interested parties an opportunity to weigh-in on the direction of managed competition,” said Burnes. “Receiving public input will help strike the appropriate balance between our current over-regulated and stifled system and full-blown competition. Neither extreme is right for Massachusetts drivers or the Massachusetts market place.”

In a separate decision on Monday, Burnes adopted an Assigned Risk Plan, changing the way high-risk drivers are distributed among the residual market. This move is designed to provide companies more control over the risks they cover in the non-voluntary market and encourage companies to provide better service than they have in the past to people insured in this market.

Source: Massachusetts Division of Insurance news release

Posted: Tuesday, July 17, 2007 12:00:00 AM. Modified: Tuesday, July 17, 2007 2:36:48 PM.

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