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Mass. Auto Insurers Under Pressure to Lower Rates

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Massachusetts Attorney General Martha Coakley says the state’s new managed competition auto insurance system is not lowering average rates for 2008 below what they would have been under the old system where the state set all rates.

Coakley has criticized the state’s largest auto insurers for being timid in their rate filings and relying on discounts for preferred drivers rather than lowered manual rates to pass along savings to drivers.

She maintains that the old fix-and-establish system would have cut the average rate for all drivers by double digits but that the average rate reduction under managed competition turns out to be only about 6 percent. Insurers, including the four largest (Commerce, Safety, Metropolitan and Premier) — which together control about 60 percent of the market — “are still seeking surprisingly similar rate changes” (an average reduction of about 6 percent) and many carriers did not take advantage of a window of opportunity to materially amend their initial Nov. 17 rate filings, according to her staff’s analysis.

“Although the commissioner of insurance invited the insurers to view each others’ filings and make changes to their own, very few changed their rates to offer better deals for consumers. Overall, rates were changes by less than 1 percent,” stated Coakley.

She said that in addition to the “disappointing average rate decreases in many company filings,” several companies, including Commerce and Liberty Mutual, have actually increased their manual rates by about 10 percent, bringing them close to the cap placed on increases by Insurance Commissioner Nonnie Burnes.

Carriers are then applying various loyalty and other discounts for preferred customers to these manual rates. This could mean that rates for drivers in some territories, including urban areas, will not benefit from the discounts and will see their premiums go up in 2008, not down.

She said it is unclear how some companies calculate manual rates and “it is possible that some decreases may not be as low as they are now being advertised” and that “many consumers will experience unexpected rate increases next year.”

Her office already announced it is challenging the rate filings of Commerce, Safety and Premier and still reviewing Metropolitan’s. She is also questioning filings by Hanover and Arbella.

The Division of Insurance has also been reviewing all rate filings and Burnes has also raised concerns with filings of Commerce, Liberty Mutual, Electric and Arbella. She said the filings erred in partly basing premiums on how much bodily injury coverage a customer buys. Commerce is also being told to revise the way it handled its group discounts in its filing.

Burnes told the carriers that giving premium breaks to insureds because they have higher bodily injury limits violates the state’s guidelines for its new managed competition system set to go into effect next April.

According to a department spokesperson, Liberty Mutual, Electric and Arbella Mutual have already indicated their willingness to fix their filings.

Commerce has said it will defend its filings as within the guidelines set by Burnes.


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