Auto Insurance reform

By Jim O’Sullivan/ State House News Service
Thursday, June 8, 2006 - Updated: 09:41 AM EST

Highly regulated auto insurers would gain increasing amounts of freedom to compete for customers over the next five years, under legislation that a Beacon Hill committee endorsed Monday.

The bill proposed by the Committee on Financial Services, all its support coming from the panel’s House side, repeals the state law that has long provided for state-set rates and gives insurers the authority to change rates from year to year within so-called flex bands ranging from plus or minus 5 percent in the first year to plus or minus 10 percent in the last year.

After five years, insurers would need only to prove to state regulators that their proposed rates are not "excessive, inadequate or unfairly discriminatory."

The bill also proposes wider latitude for insurers to rate drivers, spells out the insurance commissioner’s authority to adopt an assigned plan for high risk drivers, and mandates a 5 percent rate reduction in 2007 for good drivers while freezing bodily injury and personal injury protection rates in 2007 and 2008 for all drivers.

Committee members say it’s the most sweeping reform in decades. House chairman Ronald Mariano acknowledged that the bill faces some Senate opposition, but refused to rule out chances of its passage this session. "I’m not going to sit here and say it’s dead this year."

In a press conference packed with lobbyists and staffers, Mariano said, "This isn’t about saving. This is about trying to make us look more like other states in the union so companies will be able to look at us and say our model can work in Massachusetts, our business model, our business plan can work here."

Under the state’s current system, the Division of Insurance annually sets rates. Critics say the heavy degree of regulation discourages companies from writing private passenger policies. The committee said the number of such companies has plummeted from 55 in 1990 to 18.

The bill quickly met with opposition. The committee’s Senate chair, Sen. Andrea Nuciforo (D-Pittsfield), ripped it as "one of the most consumer unfriendly measures I have seen in quite some time. Terribly unfair to youthful drivers, urban drivers, and seniors."

"My sense is that this will not drive down rates, that it will increase rates, certainly for young people," said Rep. Anne Paulsen (D-Belmont), sponsor of competing legislation in the same committee. She added,

"I think this simply moves money around in Massachusetts."

MassPIRG, a left-leaning consumer advocacy group, said in a statement the bill would "lead to discriminatory underwriting and pricing practices and does little to address [the] root case of our high premiums."

But the Romney administration expressed support.

"This is a very positive development and we look forward to working with Chairman Mariano and other members of the Legislature to bring more competition and lower rates to the Massachusetts auto insurance system," said Romney spokesman Felix Browne.