Massachusetts Auto Insurance Reform Progresses
NU Online News Service, Aug. 31, 1:54 p.m. EDT?Massachusetts took another step toward reform of its personal auto insurance system after the state's insurance commissioner ordered the governing committee of the residual market program to review and implement new rules.[@@]
Massachusetts Insurance Commissioner Julie Bowler on Friday ordered the Commonwealth Automobile Reinsurers' to consider and implement additional consumer and market protections as the state transitions to an assigned risk program.
The action follows a public hearing held on the plan in July.
Under the current system, the state's 19 insurance companies do not share in the residual market based on market share. Instead, individuals who cannot obtain insurance on the voluntary market go to an agent who has an appointment with a CAR carrier. Under the system, some carriers have manipulated the market so they have less share of the CAR market than their competitors who are burdened with a greater share of high risk drivers.
Among some of Ms. Bowler's recommendations to CAR are:
? Clarify the rules so that drivers with good driving records are not impacted by the changes in the residual market.
? Adopt the so-called "Clean in Three" proposal, under which experienced drivers with no at-fault accidents or moving violations in the most recent three years cannot be placed in the assigned risk plan.
? Introduce incentives that will encourage insurers to create new agencies in urban areas.
? Create incentives for insurers to more effectively combat fraud, including raising insurer claims investigation standards.
? Amend proposed rules to avoid consumer disruption during the three-year transition to an assigned risk plan.
Under the order, the CAR governing committee has until Sept. 24 to submit its recommendations. A public hearing is scheduled for Oct. 4.
In a statement, Frank O'Brien, vice president and New England regional manager for the Property Casualty Insurers Association of America, said it is reviewing the commissioner's order and consulting with members before commenting.
There are currently 19 personal auto insurers in the state. Fireman's Fund said it would leave in December if there is no reform of the auto insurance market. The Fireman's Fund underwrites 1 percent of the market there.
Carriers say there is too much regulation over rates and form. They argue that CAR stifles competition because there is no differentiation in pricing or product offerings between the standard line and residual market in Massachusetts.
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