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State Gives Auto Insurers a Green Light to Compete

Jul 16, 2007

By Hillary Chabot, The Sun, Lowell, Mass.

Jul. 17--BOSTON -- Drivers could have more choice when it comes to insuring their car after state Insurance Commissioner Nonnie Burnes announced a slow introduction of competition into the auto-insurance market yesterday.

The decision means companies can set their own rates within certain parameters that Burnes will establish within the next few months. Before Burnes' decision, Massachusetts was the only state in the nation that set auto-insurance rates.

But for many local legislators, the devil is in the details.

"We'll see what happens with the execution and the enforcement. For the past three years people have seen a decrease in their bill, I'm worried that by changing the balance you start creating winners and losers," said Senate Ways and Means Chairman Steve Panagiotakos, D-Lowell.

Burnes doesn't need legislative approval to make the changes, but she could be challenged in court, or lawmakers could move to create legislation blocking the changes if public outcry is loud enough.

Burnes will also view "with

extreme skepticism" auto insurance companies that want to take home ownership, education or credit scores as factors in setting their premiums.

"I want to make sure all drivers are treated fairly and that the urban and inexperienced drivers are able to get access to insurance," Burnes said, adding that she will be scrutinizing rates to make sure they are fair. She also will hold public hearings before detailing her parameters in September.

"Receiving public input will help strike the appropriate balance between our current over-regulated and stifled system and full-blown competition. Neither extreme is right for Massachusetts drivers or the Massachusetts market place," Burnes said.

Insurers will be able to set their own rates beginning April 1.

James Harrington, who represents 10 auto-insurance agencies as part of the Massachusetts Insurance Federation, said he is pleased about the decision.

"It validates what the companies I represent and I have been saying, that we need to move away from a fixed and established rating system," Harrington said.

Massachusetts has only 19 insurers writing auto insurance in the state, and 35 companies have left the market since 1990.

It will be first time since the 1970s that auto-insurance companies can set their own rates. Rates skyrocketed in urban areas, and the changes were reversed.

Many things have changed since then, Burnes said, including the fact that rates are expected to go down next year regardless of competition.

"They only had three months to put the changes into effect, so they didn't have enough time to do an effective transition," Burnes said.

Burnes also approved moving to an assigned risk plan, which changes the way high-risk drivers are assigned to insurance carriers.

Representatives from Commerce Insurance, which filed a lawsuit against former Insurance Commissioner Julianne Bowler when she moved to create an assigned risk plan, did not return calls for comment.

Dierdre Cummings, consumer advocate at MassPIRG, was most concerned about the new risk plan, saying drivers can be rejected by insurers for many reasons and then forced to get insurance from whoever they are assigned to, often at very high rates.

"We just want to make sure the changes aren't going to benefit the auto insurance companies at the expense of the consumer," Cummings said.


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