Mass. High Risk Rules on Commissioner’s Desk; Safe Driver Plan Next on Reform Agenda

June 1, 2004

As expected, last week the governing committee of the high risk auto reinsurance facility in Massachusetts approved rules guiding the pool’s changeover to an assigned risk plan.

Commonwealth Auto Reinsurers, known as CAR, sent the rule changes to Massachusetts Insurance Commissioner Julianne Bowler for her approval. Bowler had told CAR officials to change the rules or she would step in to do it as commissioner.

CAR also adopted a timeline showing the transition should be complete by the start of 2008.

Among other procedures, the changes affect how risks are assigned to insurers, how losses are shared among insurers, and how agents are assigned to servicing carriers. The plan also includes tougher rules for monitoring of claims handling procedures by insurers and of the practices of high loss ratio agencies.

At the same time, CAR identified various issues concerning expense ratios which remain to be worked out.

The assigned risk pan idea has been pushed by Governor Mitt Romney and Commissioner Julianne Bowler and supported by a consensus of agents and insurance company leaders in the state. They hope the move to an assigned risk plan along with other reforms will brig the state’s auto system more in line with those in other states and help grow the market of only 19 auto insurers now writing.

Next on the reform agenda are changes to the state’s safe driver insurance plan (SDIP) that rewards good driver and penalizes bad drivers. Bowler has scheduled a public hearing for June 11 on how the SDIP might be amended.

According to Christopher Goetcheus, spokesman for Bowler, “changes being proposed would bring the SDIP more in line with the manner that insurers evaluate driving and accident histories in other states.”

There is speculation that the state’s own rating bureau, attorney general and the industry may come up with a joint proposal in time for the hearing.

Gov. Romney has also named a task force which he asked to focus on eliminating rate subsidies now paid by good and experienced drivers to support bad and inexperienced drivers, subsidies which a recent study by Tillinghast Towers Perrin shows are considerably higher in Massachusetts than in other states and which contribute to insurers’ reluctance to write business here.

Romney stopped short, however, of supporting elimination of a 25 percent discount given senior citizens and said he would not support erasing the subsidies that rural and suburban communities pay to cover the costs of some urban territories including Boston.

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