The last time Massachusetts tried to introduce competitive rating into personal auto insurance, a Democrat, Michael Dukakis, was governor. The experiment lasted about seven months before being abandoned due to political pressures when rates rose, particularly for urban and young drivers. The Bay State returned to being the sole state where the regulator sets rates for all auto insurers.
Now, 30 years later, Deval Patrick, is in the governor's chair, and it is this Democratic administration that is taking the political risk of changing the system.
Auto Insurers will be able to propose rates and rating criteria, subject to some parameters Burnes said she would unveil later. Insurers would be free to use the rates and criteria unless the department disapproves them.
Insurers will be allowed to file auto insurance rates based on what Burnes termed their "true" costs. In a letter accompanying her decision, she vowed that the department will retain a "strong yet supple regulatory oversight" to ensure that good drivers enjoy the benefits of managed competition, regardless of where they garage their cars.
But insurers will not be handed the keys to price completely on their own. She made it clear she will impose some limits on the rating factors insurers will be permitted to use in pricing.
The way Massachusetts law is written, the commissioner must move to competitive rating unless she finds that the marketplace could not support fair and competitive pricing or that it would impair insurers' financial condition. For the past 30 years, her predecessors as commissioner have all sided with those who cited legal or market obstacles they believed meant competition could not work.
One of the reasons the 1977 experiment failed was because consumers lacked useful information to shop for the best coverage and price, according to findings at the time. Burnes said the Internet should now make it easier for consumers to obtain the information they need.
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