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EDITORIAL: 'Dirty' Auto Rates? No Thanks

Mar 29, 2007

By The Boston Globe

Mar. 30--Strident calls to scrap Massachusetts' auto insurance system are giving way to a more thoughtful discussion about how to stimulate competition without driving premiums through the roof for young and urban drivers. A recent report by a study group convened in January by Governor Patrick manages to point the way toward reform while maintaining basic protections for the drivers of the state's estimated 4 million private cars.

The seven-member study group, chaired by state consumer affairs director Daniel Crane, argues for measured change in the only state where the commissioner of insurance sets the annual rate that all insurers use to calculate premiums. But this is not an invitation to large national insurance companies to waltz in and set rates as they please. The authors encourage Insurance Commissioner Nonnie Burnes to maintain subsidies for urban and inexperienced drivers who might otherwise hit the road without insurance.

Also, the study group unequivocally defends the current system that limits rating factors to driving experience, at-fault accidents, location, and traffic violations. Massachusetts needs no part of national insurers who use credit scores, occupation, homeownership, and other extraneous factors to dump drivers into assigned risk pools where they are forced to pay outlandish "dirty rates."

The report does accept the premise that the state's "private passenger automobile insurance market is ailing, and that some form of competitive rating is essential to attract and retain insurers." One possible solution, according to the authors, is to continue with a fixed rate for compulsory coverage while allowing companies more flexibility in pricing for optional coverage.

But even here, Burnes should go slowly. The system, as it turns out, doesn't look so sick after all.

Auto insurance rates for consumers have fallen by roughly 21 percent over the past three years, and companies that write policies here are enjoying healthy profits. These positive developments emerged even though roughly three-quarters of the state's drivers pay about $100 more each year for auto insurance so that mostly urban drivers living in areas with more theft and accidents can pay about $400 less. Everyone on the road benefits when all drivers can afford insurance.

Antifraud efforts have much to do with the savings. And rates could drop further if the commissioner can find ways to reduce the state's highest-in-the-nation accident rate. Addressing dangerous intersections and poorly marked roads could prove just as fruitful as cracking down on insurance scammers.

Former governor Romney and some House members wanted to start a Massachusetts rally race for national insurers. It was foolhardy. The study group offers a smarter route.

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