Contrary to recent news
headlines and to statements by the Commissioner of Insurance, the newly
deregulated auto insurance industry in Massachusetts
will result in excessive premiums for consumers.
Our current auto insurance
rating system, which is about to be scrapped, produced a 21% decrease in rates
over the last three years for drivers. It is widely accepted, by both insurers
and consumer groups, that under the current rating system, we would have seen
another significant drop in rates this year. How much that would have been can
be debated, but according to industry testimony submitted to the Division of
Insurance, the rate decrease would have, at a minimum, been 8.5%. See Testimony of Plymouth Rock Assurance
Company on June 15, 2007,
based on data from the Automobile Insurers Bureau. Historically, the insurers’
predictions are lower than the final rate – for example last year they proposed
an average rate reduction of 3.7%, which in the end resulted in a final
reduction three times as large, at 11.7%. Therefore, being conservative, it is
very reasonable to assume that Massachusetts
drivers would have seen an average rate reduction of at least 10% for 2008.
All rates proposed by the
insurers, as well as the Commissioner’s recent ruling that no driver should
receive a rate increase in excess of 10%, must be measured against the 10% rate
decrease consumers would have received under the current system. The
Commissioner’s 10% cap on rate increases, and the filings this week by the
Automobile Insurers Bureau for a 2.5% rate decrease and by Commonwealth Automobile
Reinsurers (the residual market) for a 9.3% rate increase, are all very bad
news for the consumer. The Commissioner’s 10% rate cap is actually a 20% cap
because drivers hitting the cap will not only receive a 10% rate increase, but
will also miss out on the 10% decrease. Likewise, the already filed rate
requests amount to increases of 7.5% and 19.3%, respectively. “These are not
the benefits of competition that consumers were promised,” said Stephen D’Amato
from the Center for Insurance Research.
For policies issuing or
renewing in April 2008, the deadline for insurers to file rates with the
Division of Insurance is November 19. “It appears at this time that, once
again, when an industry argues for less regulation and more competition, the
consumer pays,” concluded Deirdre Cummings,
legislative director for MASSPIRG.
The real question is why our
Governor lets this happen.
