Compare Insurance Rates & Save

Auto Insurance Competition May Be Coming. Will You Pay Less?

Jul 14, 2007

By Hillary Chabot, The Sun, Lowell, Mass.

Jul. 15--BOSTON -- New state Insurance Commissioner Nonnie Burnes announces tomorrow whether competition will be introduced into Massachusetts' state-regulated auto-insurance market.

Massachusetts is the only state in the nation where the state sets auto-insurance rates. Insurers and legislators have been arguing for years over whether competition will improve the insurance market, pointing to the effect on rates, coverage and number of drivers insured.

For many motorists, however, the question is simple: Will I pay less?

The answer, at least for the most recent state to introduce a slightly regulated form of competition into the auto-insurance market, is yes.

Drivers in New Jersey, which allows insurance companies to set rates within a certain percent range each year, have seen their premiums drop by $53 since 2003, when they approved sweeping auto-insurance reform.

Complaints have also gone down, from 5,770 in 2003 to 2,465 last year, while the number of companies offering auto insurance in New Jersey has

gone up from 62 to 70. Massachusetts has 19 carriers.

James Harrington, executive director for the Massachusetts Insurance Foundation, said this is the best step for the state. Harrington represents a group of auto insurers pressing for competition.

"We have recommended reform for years, but we've also suggested on a regular basis that we need to protect existing subsidies," Harrington said.

So what's keeping Sen. Steven Panagiotakos, along with Attorney General Martha Coakley, consumer advocates, urban legislators, and half of the state's auto insurers from supporting a move toward competition?

What you get for the money.

"(New Jersey drivers) have a policy-insurance product which is significantly less than what you used to be able to buy there," said Deirdre Cummings, a consumer advocate with MassPIRG. "They're seeing a drop in rates because they're selling half a loaf of bread."

Cummings served on the seven-member Auto Insurance Study Group selected by Gov. Deval Patrick to review competition and report on the best way to introduce it to the state.

The report they issued called for a move toward introducing competition, but it also emphasized other routes to lower auto-insurance costs such as improving high-risk intersections. Members expressed deep concern about insurers' ability to cherry-pick good drivers using not only age, but credit scores and marital status to jack up rates.

Another deterrent is that rates are falling already. Average drivers have seen their premiums go down by 30 percent in the past three years. Why fix something that isn't broken, Panagiotakos asked?

"To upset the apple cart and change the dynamic is not what people are looking for at this point in time. There doesn't seem to be any outcry from the general public," said Panagiotakos, a Lowell Democrat.

Some legislators also argued that rates can be further reduced by fixing intersections with high rate of accidents, but ultimately they won't have a vote once Burnes makes her decision.

Coakley, who would have to defend Burnes in possible lawsuits if she goes ahead with allowing competition, argued against the change saying that the sudden switch would spark lawsuits and confuse consumers.

But perhaps the biggest argument against change is history.

Sen. Robert Havern, D-Arlington, was in office when officials moved to introduce competition in the 1970s.

"It was disaster. Lowell was one of the areas that was really affected. There were people in Lowell who had clean driving records who saw premiums go up by 30 percent," said Havern, whose district includes Billerica and Burlington. "The rates were astronomical."

Even New Jersey didn't move to a completely deregulated system like Massachusetts did in 1976, and it still subsidizes high-risk drivers. A portion of every premium goes toward subsidizing urban drivers so they aren't paying rates they can't afford, said Jim Gardner, spokesman for the Department of Banking and Insurance in New Jersey.

The state is also redrawing territories to try to include a mix of urban and suburban in each to ensure urban drivers don't get whacked, Gardner said.

Patrick, although he implied support of introducing competition during his campaign, has remained tight-lipped over the last week. On Thursday, he refused to answer a reporter's questions about allowing competition into the auto-insurance market.

Burnes wouldn't speak about the coming ruling, and Coakley declined to discuss her views on deregulating auto insurance.

Whatever Burnes' ruling, most legislators in Greater Lowell seem to feel the change should be slow and measured to make sure insurance companies don't take motorists for a ride.


To see more of The Sun, or to subscribe to the newspaper, go to

Copyright (c) 2007, The Sun, Lowell, Mass.

Distributed by McClatchy-Tribune Information Services.

For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

Insurance News: Auto Insurance Competition May Be Coming. Will You Pay Less? ; Get an insurance quote! « Back