Auto insurers blame state's regulation

By Bruce Mohl, Globe Staff | January 18, 2005



Only two of the 20 companies selling auto insurance in Massachusetts will offer discounts to good drivers this year.



Amica Insurance, of Lincoln, R.I., and tiny Electric Insurance, of Beverly, have notified state regulators that they intend to offer drivers in the best classification, Step 9, discounts of 5 percent. That's about $53 off the statewide average premium of $1,063.



The number of companies offering good-driver discounts and the size of those discounts have been steadily shrinking since 1999. One analyst said the trend is an ominous sign as Governor Mitt Romney and most of the state's auto insurers push for a competitive auto insurance market.



''It doesn't bode well for a shift to competition any time in the near future," said Stephen D'Amato, executive director of the Center for Insurance Research in Cambridge. ''In fact, it probably suggests we'd see an uptick in rates if we do shift to competition."



Romney has a task force working on sweeping proposals to overhaul the auto insurance system. He wants to attract national insurers to Massachusetts by reducing state regulation and letting insurers set premiums themselves.



''Our constituents will know when the job is done," Romney told lawmakers in his State of the State speech last week. ''National insurers, whose advertisements we see every day on television, will finally come back to Massachusetts. Better drivers will see better rates. We in Massachusetts should be able to buy reasonably priced auto insurance, just like everybody else."



Massachusetts is the only state that sets all auto insurance rates by regulation, but companies are allowed to engage in limited competition for customers by offering voluntary discounts. During the 1990s, companies sought to increase their market share by offering discounts of as much as 20 percent, but since 1999 the size of the discounts has steadily declined, along with the number of companies offering them. Auto insurers say the drop-off reflects an inadequate rate structure and an unfriendly regulatory climate.



Last year, three companies offered good-driver discounts; two are doing so this year. Fireman's Fund Insurance, which briefly flirted with pulling out of the state last year, dropped its 2 percent good-driver discount.



The one piece of good news on the discount front was Amica's saying it would increase its good-driver discount to 5 percent, from 4 percent.



Last year, in lowering its discount from 6 to 4 percent, Amica said it couldn't offer more because rates overall were inadequate and it was losing money covering its share of the losses from high-risk drivers.



Most insurers are continuing to offer discounts to members of groups and associations and to employees at various companies. The most popular group discount is the 5 percent reduction offered by Commerce Insurance, of Webster, to members of the American Automobile Association.



Plymouth Rock Assurance Co., of Boston, offers 10 percent discounts to members of the Conservation Law Foundation and the Massachusetts Audubon Society, while Premier Insurance, of Worcester, offers a 10 percent discount to employees of Boston University.



A list of approved group discounts is at www.state.ma.us/doi. Select ''consumer service" and then ''auto."



While group discounts continue, officials at several companies said their ability to keep offering them may be jeopardized by changes recently approved by Romney's insurance commissioner in the way high-risk drivers are apportioned among companies. Many of those changes will not take effect until next year.



Commerce, the largest auto insurer operating in the state, with 28 percent of the market, has sued Insurance Commissioner Julianne M. Bowler to block the new rules.