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Mass. Might Ease Auto-Rate Controls

May 18, 2007

By Bruce Mohl, The Boston Globe

May 19--Insurance Commissioner Nonnie S. Burnes yesterday signaled she is seriously considering introducing some form of competitive rate-setting to the Massachusetts auto insurance system.

At a hearing on whether the state is ready for auto insurance competition next year, Burnes did not say what she plans to do, but her questions indicated she was trying to find a way to give auto insurers more power to set their own rates. Massachusetts is the only state in the nation where regulators set all auto insurance rates.

At one point, when a witness noted her predecessor had concluded she lacked the legal authority to introduce competition, Burnes snapped: "She's not the insurance commissioner anymore."

Deirdre Cummings, consumer education director at the Massachusetts Public Interest Research Group, who opposes moving to a competitive system next year, said the tone of the hearing was very different from past years, when attendance was sparse, and the result was usually a foregone conclusion.

"She is seriously, seriously considering moving to a competitive system," Cummings said.

The last time a commissioner authorized competitive rate-setting was in 1977. Rates skyrocketed for some young and urban drivers, prompting the Legislature to scrap the program.

Glenn Watkins, a Virginia-based consultant hired by the State Rating Bureau, a unit representing consumers within Burnes's Division of Insurance, testified that rates would not skyrocket if competition was introduced.

Former Governor Mitt Romney pushed for auto insurance competition but his efforts came up short. Governor Deval Patrick this year appointed a group to study the issue. It concluded "some form of competitive rating is essential to attract and retain insurers willing to write this line of business."

Romney and his supporters contended that many national companies refuse to do business in Massachusetts because the commissioner sets rates. Geico Corp., for example, one of the nation's largest auto insurers, does business in every state but Massachusetts.

A group of insurers calling itself the Fairness for Good Drivers Coalition urged Burnes to transition to a competitive market by allowing companies to change their overall rates up or down by 5 percent next year while not allowing any individual driver's rates to go up by more than 10 percent. The group, which includes Liberty Mutual Insurance Co. of Boston, also said suburban drivers should continue to subsidize lower rates for urban drivers.

Attorney General Martha Coakley opposed the introduction of competition, as did several of the state's largest auto insurance companies and consumer groups. Several officials noted rates have dropped 20 percent over the last three years and warned that rates in a competitive system would be based less on an individual's driving rec ord and more on lifestyle factors, including occupation and educational level.

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