Insurer sues MA over high-risk drivers

By Julie Mehegan,

Transcript Statehouse Bureau



BOSTON -- The state Division of Insurance remains committed to a new system of dividing high-risk drivers among auto insurance carriers, despite pending legal action by one of the state's largest insurers.

"The rules are in play, and the transition commences, and we wouldn't have any comment on the litigation at this point until after it is ruled on," said Christopher Goetchus, a spokesman for the state Division of Insurance.



Webster-based Commerce Insurance Inc. has sued Insurance Commissioner Julianne Bowler over regulatory changes she implemented on Jan. 1 that may require the company to assume a larger share of the so-called "residual market" of high-risk drivers.



Commerce has asked a Suffolk Superior Court to review whether the changes are consistent with Massachusetts law, or whether Bowler may have overstepped her authority by unilaterally imposing them. Under the new regulations, the state is set to move to an "assigned risk" system over the next three years. The new system will randomly assign high-risk drivers whom insurance companies don't want to voluntarily insure to individual carriers, based on each company's market share.



Under the old rules, agents representing high-risk drivers were assigned to certan carriers, but the carriers were permitted to cede those drivers into a high-risk pool, the cost of which was distributed among all insurance companies.



The new system will force the insurers to directly assume the cost of losses the high-risk drivers might incur.



James Ermilio, senior vice president and general counsel at Commerce, was out of the office and could not be reached for comment yesterday on the lawsuit. In an earlier statement the company said the new system raises "serious legal issues."



In August, Ermilio told a trade publication that Commerce opposes the new system not because it fears competition, but because of concerns over exposure to liability from potential violations of existing consumer protection laws.



Critics of the new system have also suggested Bowler should not have implemented it without legislative input.



But most of the state's other insurers back the new system, suggesting it will distribute the cost of insuring high-risk drivers more fairly.



The new Massachusetts Assigned Insurance Program is part of the Romney administration's effort to make the state's highly regulated auto insurance market more competitive. Massachusetts is the only state in the nation that sets auto insurance rates.



Despite the effort at reform, there was discouraging news this week for those who have a strong record behind the wheel. Only two companies have sought approval from the state to offer "good driver" discounts to customers who have a good safety record, down from three companies last year.



The number of companies offering the good driver discount has plummeted over the past decade, with insurers insisting the state's regulations have made it cost-prohibitive. Only Amica Insurance and Electric Insurance Co. of Beverly will offer the good driver discount this year.