Mass. Judge Nixes Residual Reform

Mass. Judge Nixes Residual Reform

A Massachusetts Superior Court judge ruled yesterday that Insurance Commissioner Julie Bowler does not have the authority to reform the state's auto residual market.

"The ruling is a disappointment, but we knew going in that reforming automobile insurance in Massachusetts would be difficult," said Frank O'Brien, vice president and regional manager for the Property Casualty Insurers Association of American (PCI).

Massachusetts Insurance Department spokesman Chris Goetcheus said the department has 30 days to decide whether or not to appeal in the state Court of Appeals and will make a decision in that time.

Last December, Ms. Bowler announced plans to reform the Commonwealth Automobile Reinsurers system to place higher risk drivers with insurers in proportion to their voluntary market share, ending the assignment of involuntary agents' policyholders to insurers through a subscription formula.

But the local insurers in the state sought an injunction, claiming that the current system has resulted in lower rates for the state's motorists.

"The commissioner's proposed plan would have provided for a fairer and more equitable distribution of the residual market costs and burdens," Mr. O'Brien said.

Earlier this month, Republican Gov. Mitt Romney introduced auto insurance reform legislation that would grant the commissioner authority to carry out residual market reform along the lines of Ms. Bowler's proposal.

However, Mr. Romney's concept faces a tough fight in the Democratic Legislature, although Mr. O'Brien said the "stars are aligned now for auto reform like they have never been before."