Shortchanged on auto insurance

August 15, 2005



REFORMING AUTO insurance in Massachusetts requires a lot more than simply reducing rates. Believing that there are enough auto insurers already here, or that we can attract insurers by fixing only part of the problem, is a disservice to consumers statewide. To increase choice, lower rates for good drivers, and infuse needed capital, we need to move to a competitive marketplace.



You don't have to look further than your television to realize how little choice Bay Staters have for auto insurance. During a Red Sox/Yankees game earlier this season, the ads made it very clear: If you want to find out how to save $200, the ''gecko" can't help you in this state, and neither can the many other insurers who won't come here.



Most of the ads we see are actually national marketing campaigns, because insurers compete for consumers in 49 other states. Here, most of our 18 insurers don't actively pursue us because they don't need to. They know a fair amount of us will end up with them anyway.



Recently, another small auto insurer announced it was leaving Massachusetts, another victim of our system's failings. Some 22,000 drivers will be forced to switch insurers next year. This has happened to hundreds of thousands of drivers in our state in recent years, and it wasn't their choice.



In the last year and a half, almost 30,000 Massachusetts consumers have also lost choice in their home insurer. This frustration may have been averted if we didn't have a system that repels national insurers who offer a full menu of products.



How bad is it? Most of us get our insurance through our neighborhood insurance agency. About 55 percent of the state's insurance agents have a business relationship with only one auto insurer. Very few have contracts with a variety of insurers. So when you walk through the door, you aren't greeted with a range of options. And where we once had substantial discounts for clean driving records, now we have virtually none, and our insurers spend their capital pursuing the best of the worst drivers, because that's what the system encourages.



Massachusetts consumers have long been able to shop for competitive home insurance and mortgage rates. They should be allowed to do the same for auto insurance. But with only one policy and one state-set rate, our consumers cannot tailor coverage to their needs or shop their good driving records around for the best rates .



Worse yet, the vast majority pays more than it should while a small percentage of drivers, some with very bad driving records, pay less than they should. Not to mention the $300 million passed on to all of us every year resulting from the accidents and claims filed by those worst drivers.



Governor Romney's auto insurance reform plan will provide drivers with greater choice in product and price, something that consumers expect and already have in most markets and every other state in the nation. It will reduce the costs of fraud that are passed on to policyholders by making insurers individually responsible for those costs.



Equally important is the personal responsibility that drivers who fuel our highest-in-the-nation accident rate will have to accept. In a competitive market, the financial incentive will finally exist for those drivers to improve their driving, because the vast majority of us deserve a better rate and some real choices.



To kick-start that, the governor's 5 percent rate rollback for drivers with clean records would be applied in addition to any rate decrease the insurance commissioner might approve.



Our system is not benefiting consumers. These changes will not happen without your voice being heard. The very few insurers who benefit under this system and claim to have our interests at heart are spending a great deal of time and money to maintain the status quo by generating fear and uncertainty. An effective government remedies problems before they affect citizens. Our elected state officials need to know that Massachusetts drivers want the same choices that drivers in every other state already have.