In Mass., competition not like a box of chocolates

Massachusetts Rep. Ronald Mariano, D-Quincy, and the committee staffers who crafted his auto insurance competitive rating bill tried to sweeten the deal by throwing some bon bons into the box, including fraud fighting funds, an apparent ban on the use of credit scoring, mandatory rate relief, retention of certain subsidies for urban drivers and seniors, and temporary caps on liability rate increases.

But even with these extra goodies thrown in, the state’s independent agents and other opponents see only jellies and they aren’t biting, just as they didn’t last year when they came out against a similar bill offered by Gov. Mitt Romney.

“We are still opposing it,” declared Daniel Foley, vice president of government affairs for the Massachusetts Association of Insurance Agents.

“This bill is terrible for consumers,” maintained Steve D’Amato from the Center for Insurance Research. “Even drivers with perfect driving records could see dramatic increases in their auto insurance rates.”

Sen. Andrea Nuciforo, D-Pittsfield, co-chair along with Mariano of the Joint Financial Services Committee, which endorsed the bill without the support of senators, termed the bill “dreadful” and vowed it would be “dead on arrival” should it even make it to the Senate.

A number of homegrown insurers including Arbella and Commerce that are behind the group called the Massachusetts Coalition for Affordable Auto Insurance are running ads warning against changing the system. “With this so-called reform, you pay more for auto insurance if you live in a city, park on the street, maintain a credit card balance, work a blue-collar job, or have other circumstances that have nothing to do with your driving record,” one of the group’s ad proclaims.

An analysis of the Mariano measure prepared by Arbella and echoed by other opponents questions the claim that the bill would prohibit the use of credit scoring. The use of credit scoring, while prohibited in pricing, could still be used in offering or canceling a policy. Companies will simply set up various subsidiaries and steer the undesirable credit risks to one of their higher-priced units as they do in other states, the critics contend.

Also, insurers would be free to use other pricing variables, such as home ownership and accidents, whether at fault or not.

Critics also maintain that the current system has been saving drivers money at a better clip than the caps and refunds promised in the Mariano bill would do, at least in the short run.

While they tout the rate caps and other sweeteners, supporters’ main argument is that the measure would help make the state’s system run more like those in other states and thereby attract additional insurers and consumer choice.

“There is no competition between companies for business today. By bringing in more companies, and by bringing competition back to the Massachusetts automobile insurance market, we will help consumers get the lowest rates,” promised Mariano.

“Insurance companies have fled the state, leaving consumers with little choice. More importantly, our convoluted auto insurance system, the only system in the country in which the state sets the rates, is contributing to a growing problem in our personal lines market,” Mariano added.

Supporters have backtracked a bit on the latter contention that the bill might also help solve a homeowners insurance crisis in coastal communities, acknowledging that even if new insurers came on the scene they too would likely steer clear of coastal properties.

But they insist reform is a matter of fairness and more choice for Massachusetts consumers.

“This bill will go a long way to bringing real reform to auto insurance by increasing consumer choice and competition, it offers numerous protections for consumers as well as attracting much needed new capital,” James Harrington, spokesman for Fairness for Good Drivers, said.

The American Insurance Association and Property Casualty Insurers of America recognized that the road to reform would not be easy.

“We are facing a hard fought battle ahead with anti-reform organizations willing to go to great lengths to defeat a bill that will ultimately provide additional choice and competition to Massachusetts’ long-suffering consumers,” the groups said.

Are Bay State drivers so “long suffering” that they now clamor for change? MAIA’s Foley has his doubts. “People aren’t out there screaming for auto insurance reform,” he notes, adding that both houses have other priorities including a budget to iron out before they adjourn in July. Plus this is an election season.

However, veteran lobbyist Foley also knows anything can happen. “We’re not taking anything for granted,” he says. He will continue urge agents to contact lawmakers to oppose the bill.

Topics Auto Massachusetts