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Panel: State Shouldn't Set All Auto Rates

Mar 26, 2007

By Bruce Mohl, The Boston Globe

Mar. 27--A study group appointed by Governor Deval Patrick is recommending few major changes in the state's auto insurance system, although the seven-member panel says the state's auto insurers should be given flexibility to partially set at least some of their own rates.

The study group's report, dated March 15 but scheduled for release today, urges the insurance commissioner to explore moving toward a system that would allow insurers to set their own rates within ranges established by state regulators. Currently, regulators set all rates.

Pricing bands could be used for all policies or just optional coverages, with state regulators continuing to set rates for compulsory coverages, the report suggested.

"The study group believes that the Massachusetts private passenger automobile insurance market is ailing, and that some form of competitive rating is essential to attract and retain insurers willing to write this line of business," the report said.

Former Governor Mitt Romney had reached a similar conclusion, but he had pushed unsuccessfully for sweeping changes in the automobile insurance business that would have allowed companies much greater flexibility in setting their own rates. The industry is split on the need for change.

The study group also recommended putting on hold a Romney administration initiative that would have changed the way drivers that no insurer wants to cover voluntarily would be apportioned among companies.

Romney had said moving to a so-called assigned risk plan was a necessary first step in overhauling the system.

Daniel C. Crane , the chairman of the Patrick study group and director of the state Office of Consumer Affairs and Business Regulation, said the recommendations were delivered to the governor and will be passed along to the state insurance commissioner, Nonnie S. Burnes . Burnes must make a decision in April on the Romney administration's assigned risk plan.

"It's now up to the commissioner to make her own decisions," Crane said.

The study group recommended retaining the existing rate subsidies for urban and inexperienced drivers, which are financed by surcharges on the rates of suburban, rural, and experienced drivers.

The group also said insurers should be allowed to set premiums based only on a driver's years of experience behind the wheel, record for accidents and traffic violations, and where the car is garaged. In many states, insurers set rates using a driver's marital status, job type, and financial background.

The study group recommended continuing the crackdown on fraud while increasing enforcement of motor vehicle laws and improving dangerous intersections. Tougher seat-belt laws, restrictions on cellphone usage while driving, and cameras at traffic lights were other options suggested.

In addition to Crane, the study group included Deirdre Cummings , consumer program director at the Massachusetts Public Interest Research Group; Paul S. Doherty , a partner at the Springfield law firm of Doherty, Wallace, Pillsbury & Murphy; Paula Gold , a vice president at Plymouth Rock Assurance Corp. of Boston; developer Patrick Lee of Trinity Financial; Joseph Meado , professor of finance and insurance at Northeastern University; and Susan Scot , legal counsel at Premier Insurance of Worcester.


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