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EDITORIAL: Insurance Unsettlement

Jul 17, 2007

By The Boston Globe

Jul. 18--Insurance Commissioner Nonnie Burnes made some auto insurers happy this week by dismantling the decades-old "fixed and established" system by which the state sets the annual maximum rate used by insurers to calculate premiums. No such joyous sounds, however, are coming from consumer organizations concerned about what these changes could mean for young and urban drivers.

Next year, insurers will begin proposing their own rates.

Burnes says she is confident that her "managed competition" system will lead to lower premiums for many of the state's drivers. Suburban motorists who look like good risks to insurance underwriters could catch a break, especially if there are no teen drivers in the family. But a few years down the road, upward of 1 million Massachusetts drivers could find themselves thrown into an assigned risk pool, randomly assigned to an insurer, and slapped with higher premiums and the loss of discounts, according to the nonprofit group MASSPIRG.

Burnes says she is motivated by a desire to bring lower rates to all consumers with good driving records, regardless of where they live. We have no reason to question her sincerity. But her case would be more convincing if she would unequivocally reject the practices of national insurers now looking to expand into Massachusetts. In other states, they use extraneous factors, such as a driver's education, occupation, homeownership status, and credit score, when setting rates.

In her decision Monday, Burnes wrote that any such efforts by insurers would be met with "extreme skepticism" on her part. And in an interview yesterday, she said she doubts any company could provide compelling evidence justifying the use of such data. Yet she did not categorically rule out the application of socioeconomic factors that would likely fall especially hard on urban and immigrant drivers. She needs to set that limit specifically before national insurers arrive with their big promises and small print.

At least during the transition stage, Burnes says, she will protect the system that flattens rates for urban and inexperienced drivers. But the future is uncertain. In Massachusetts, about 80 percent of drivers pay a little more so that 20 percent of drivers can pay a lot less. That subsidy is a significant reason that Massachusetts has the second-lowest rate of uninsured motorists in the nation. It would be a shame, and a potentially costly one for all insured motorists, to see that rate rise.

Burnes, a former Superior Court judge, isn't reluctant to use her discretion or assert control. But it's one thing to manage a courtroom and another to control an auto insurance market with roughly 4 million autos. Until she supplies more details about her deregulation efforts -- especially the factors that mark a driver as high risk -- there will be a lot of nervous drivers around here.


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