At a hearing in Boston today, the American Insurance Association called on Massachusetts Insurance Commissioner Nonnie Burnes to institute a change in the state's auto insurance rating system.
John Murphy, AIA vice president-Northeast Region, urged a move to a competitive model. AIA's comments were presented in testimony at a hearing called by the commissioner on whether to move to competition or maintain the "fix and establish" system.
Under Massachusetts law, competitive rating was "temporarily suspended" 30 years ago. Each year since, a hearing has been held to determine whether to continue with fix and establish or move to competition.
Under fix and establish, the industry rating board makes a filing for the entire industry, the state attorney general makes a filing, and the State Rating Board within the Department of Insurance makes a filing. Then the commissioner sets one rate for each territory and classification that all insurers must use.
After hearing testimony, the commissioner is compelled to make a ruling. The fix and establish filing process begins in August and ends with the commissioner's decision in December.
According to an advance copy of his remarks, Mr. Murphy said, "The time has come to retire the 'one size fits all' rating structure so that Massachusetts consumers can shop for auto insurance which fits their needs."
AIA noted that the commissioner has broad regulatory powers to allow competition to operate while taking reasonable steps to ensure market stability and avoid market dislocation. Those steps include flex-rating bands and reasonable subsidies for some drivers.
"Insurers are ready, willing and able to compete. The commissioner can ensure a deliberate and controlled move toward full competition. AIA urges the commissioner to embrace this opportunity to revitalize and modernize the auto insurance marketplace," Mr. Murphy concluded.
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