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Mass. closes in on long-awaited transition to auto assigned risk plan

Massachusetts Insurance Commissioner Julianne M. Bowler has ordered the implementation of an assigned risk plan for the state’s private passenger auto insurance market. The assigned risk plan will replace the existing pooling mechanism and establish new incentives for companies to fight fraud, according to Bowler.

Bowler’s final order came after more than four years of delay and debate, including a unanimous Supreme Judicial Court decision in August which upheld her authority.

“Reform is long overdue. Massachusetts currently has the highest losses associated with high-risk drivers as compared to every other state,” said Bowler. “By implementing the assigned risk plan, insurance companies will no longer be able to disassociate themselves from the policies that they transfer to the residual market. Companies will now be responsible for all their policies, forcing responsible management of losses and a greater incentive to fight fraud in the marketplace, which means lower rates for drivers.”

The new ARP, called the Massachusetts Assigned Insurance Plan, is to be phased in over a three-year period as implemented by Commonwealth Auto Reinsurers, which administers the state’s high risk system. On April 1, 2007, all new business that insurance carriers decline to write voluntarily will be placed in the MAIP.

However, as of April 1, 2007, carriers will not be permitted to non-renew so-called “clean-in-three” drivers for a three-year period. Bowler said this is meant to give the market the opportunity to design a permanent protection for these good drivers. “Clean-in-three” risks, about 75 percent of the current market, are those who have not had an accident or moving violation for three years.

On July 1, 2007, more risks will become eligible for the new plan, including drivers with 10 or more points that insurance carriers decline to write voluntarily.

Then on April 1, 2008, all other business (except “clean-in-three” risks) that insurance carriers decline to write voluntarily can be placed in the MAIP.

Bowler moved ahead with MAIP, which several domestic insurers opposed, while operating under a cloud of uncertainty regarding her own future. The industry is waiting to see whether the administration of incoming Gov. Deval Patrick will keep Bowler or otherwise go along with Bowler’s plan. “I haven’t had any communication,” Bowler told Insurance Journal.

Would she stay on as commissioner if asked?

“It depends on what Governor-elect Patrick wants to do with the agency,” she said. “If it’s going to stay with its current business-like approach, then I’d have an interest. If it’s going to go back to the days of certain political interests controlling this agency, I have no interest in that.”

Topics Massachusetts