Also, advises against assigned risk pool change at this time and against erasing subsidies or allowing credit scoring
A special auto insurance study group appointed by Massachusetts Gov. Deval Patrick has recommende
d modest changes to introduce limited pricing competition to the state’s
highly-regulated auto insurance system, while warning against a proposed overhaul of the state’s high risk pool at this time.
Although the study group found that introducing “some form of competitive rating is essential to attract and retai
n insurers willing to write this line of business in the Commonwealth,” it stoppe
d short of recommending fully competition-based pricing.
Instead, the state should retain its state-set rates while considering ways to grant insurers some pricing flexibility, the study group concluded in its the report. This
flexibility could come in one of two ways: permit insurers to deviate up
and down from state-approved rates within certain limits, so-called flex bands, or retain state-set rates for compulsory c
overages only and give insurers more flexibility to price optional coverages themselves.
The panel advised in favor of keeping existing rate subsidies for
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urban and inexperienced drivers and against allowing the use by insurers of credit scores, occupation or education criteria in pricing.
It urged a delay in creation of an assigned risk plan until a 2006 re
distribution of residual market agents is assessed, although the study group’s members did not rule out introducing an assigned risk plan down the road.
The group also urged more cost containment efforts and quicker approval of new endorsements and extra coverages.
Patrick convened the study group on Jan. 26, after instructing the Division of Insurance to halt the implementati
on of a new assigned risk plan advanced by the Romney Administration to replace the existing agent-assignment high risk system.
He asked the group to “identify opportunities within the existing system to increase competition and reduce costs while maintaining equity.”
Some of the recommendations would require legislative actions, while others could be accomplished though regulatory changes.
Issues of concern
The study group members included Chair Daniel Crane, director of the Office of Consumer Affairs and Business Regu
lation; Deirdre Cummings of the consumer group, MassPIRG; Paul Doherty, a Springfield attorney whose firm specializes i
n business law and tax; Paula Gold, vice president and chief regulato
ry counsel from Plymouth Rock Assurance Corp.; Patrick Lee, executive vice president of Trinity Financial; Joseph Meador, professor in the College of Business Administration Nort
heastern University; and Susan Scott, senior vice president and general counsel of The Premier Insurance Co. of Mass.