Mass. Moves To Fix Auto Insurance System

By Mark E. Ruquet

NU Online News Service, May 3, 4:14 p.m. EDT?Massachusetts governor has formed a task force aimed at findingsolutions for the state's automobile insurance system, while itsinsurance commissioner has proposed changes to its residual marketpool.[@@]

Gov. Mitt Romney, in a statement, said the purpose of the sixmember task force will be to review potential changes to the systemthat would attract companies to return to the state, reform therate-setting system "that is more in line with the rest of thecountry, review the state's no fault claims process, crack down onfraud "and eliminate the subsidy that good drivers pay for baddrivers."

"It's time to give our consumers more choice and the advantagesthat come with safe driving," the governor said in a statement."The goal of the task force is to form a consensus for a fair andsmooth transition to a competitive marketplace."

The task force will consist of Insurance Commissioner JulieBowler; representatives from the legislature, the AttorneyGeneral's office, the Secretary of Economic Development; and theDirector of Consumer Affairs.

Gov. Romney said he expected the task force's recommendationsbefore the end of the year.

The governor also said that Ms. Bowler has directed thegoverning committee for the state's residual market, CommonwealthAutomobile Reinsurers, to revise the rules in an effort to achievefair distribution of insurer losses generated by the state's highrisk drivers.

The governors office noted a report performed for the Divisionof Insurance by Tillinghast, a Towers Perrin company found thatlosses within the CAR are not distributed equally amongparticipating companies and rates do not properly reflect lossexperience.

"We think the real story here is the residual market change,"observed Frank Mancini, president and chief executive officer ofthe Massachusetts Association of Insurance Agents in Framingham,Mass.

Mr. Mancini said, "What the commissioner proposes moves us to anassigned risk system from our current system that is assignedagency. That structure has done a lot to reduce our market to only19 carriers. The directive to move the system, we think, will do alot to stabilize the erosion of the marketplace and maybe bringsome companies back in."

The Property Casualty Insurers Association of America, based inDes Plaines, Ill., praised the creation of the task force.

"Reforming CAR and then changing the commonwealth's archaicinsurance regulatory process will open the market to competitionand encourage insurers to take another look at doing businesshere," said Frank O'Brien PCI vice president and New Englandregional manager in a statement.

Tami Stanton, National Association of Mutual Insurance Companiesstate affairs manager for the Northeast U.S., based inIndianapolis, blasted Massachusetts insurance regulatory system,saying in a statement that system meant to protect consumers fromoverpricing has done the opposite.

"Massachusetts drivers should not have to suffer the ravages ofexcessive regulation," she said. "The time for reform in now andcompetition is the answer."