Drivers with good driving records, good grades, hybrid vehicles, property policies and pets are among those who could benefit under auto insurance rating plans filed for use in 2008 in Massachusetts.
Indeeed, most drivers should see savings next year. According to rate filings submitted to the state by insurers on Nov. 19, from 70% to 80% of all drivers should see rate decreases beginning in April 2008 when the new managed competition system goes into effect. For the rest, rate hikes up to 10% are possible.
The average rate decrease across all 19 insurers for all drivers statewide is about 7.7% but some drivers could see bigger rate reductions — as much as 20%, 30% and 35%.
Not only should the majority of drivers enjoy lower rates in 2008, but many could also get increased benefits while paying less.
Fourth-largest writer Liberty Mutual said its best customers could enjoy up to a 35% reduction, while the top writer Commerce and ninth largest Hanover said they will cut rates by as much as 30% for their best risks.
Travelers of Massachusetts (Premier) says approximately 75% of its customers will save money, with more than a third saving greater than 10% and some customers 20% or more.
At MetLife Auto & Home, about 74% are getting decreases, with the best risks saving up to 20% or more. Rates will go up 5% or less for about 19% while 4% of MetLife accounts will see increases over 5%.
Encompass, which insures about 2.5% of the market, says not only will nearly one-quarter of its customers receive decreases better than 10%, but also not a single current customer will see any increase.
Average statewide rate reductions filed by the top 10 carriers (with their market share) are:
Company Average Decrease
Commerce (31.6% share) 8.1%
Safety (11.2%) 6.9%
Arbella Mutual (9.3%) 6.2%
Liberty Mutual (7.9%) 10.7%
MetLife Auto & Home (6.9%) 5%
Premier /Travelers (6.6%) 6.0%
Plymouth Rock (5.7%) 4.0%
Amica Mutual (3.8%) 7.9%
Hanover (3.6%) 7.5%
USAA (2.6%) 15%
Companies writing under 1% of the market previously filed for an average 2.5% rate reduction. These include Norfolk & Dedham Group, Allianz Insurance Group, State Farm and American National Financial Group. Another in this group, Electric Insurance Group, submitted its own filing for an average 5% decrease and savings of up to 30% for some drivers.
Frank Mancini, president and CEO of the Massachusetts Association of Insurance Agents, said the first day of rate filings represents “good start” for the new system and he was pleased to see the state’s independent agency companies being competitive in their offerings.
But Mancini stressed that the statewide average rate decrease is not the entire story. According to Mancini, customers and their agents will “need to look at more than rates” to determine the best deal.
Indeed, carriers signaled their desire to keep their current customers and compete for the best new business with more than just rate cuts. They are proposing deep discounts, coverages add-ons, additional services and even disappearing deductibles — features they have been making available in other states for years.
“New product features and new discounts— this is what competition brings to drivers,” said James MacPhee, Liberty Mutual senior vice president and general manager for New England. “Accident forgiveness? Not in Massachusetts before managed competition. Under the old rate-setting system, consumers did not see companies enhancing their products or providing new discounts.”
According to Vincent Nieroda, president of The Hanover’s Massachusetts personal lines group, this is just the beginning. “Even though competition is just getting under way and Massachusetts drivers will realize significant savings now, many more benefits will evolve over time, as new companies enter the market, new products are introduced and companies fight for market share,” he said.
Which drivers companies consider their best customers and therefore eligible for the biggest savings and added benefits depends on driving record but also involves other factors including their relationship with the carrier and other insurance policies they might own.
Carriers are not permitted to utilize socioeconomic factors such as home ownership, credit scores or income in their rates or underwriting, but they are offering discounts and credits to the drivers most likely benefit if those factors were permitted.
For example, a number of insurers are offering discounts to those who also have a home, condo or tenant policy with them. Carriers are circumventing the ban on home ownership as a rating factor by offering the discount to anyone with a property insurance policy — including tenants — and not just home owners. Commerce will even extend this discount to insureds with property insured in the residual market, the FAIR Plan, as well as with its own company.
Most insurers are also giving discounts to those insuring more than one car.
Insurers will be looking closely at driving records. Hanover Insurance is proposing to cut the state’s six year surcharge period for accidents and convictions to three years for its customers, while Safety and MetLife Auto & Home want to recognize excellent drivers based on their merit ratings.
Several companies, including Encompass, Hanover and Liberty Mutual, are proposing accident forgiveness.
Those who pass a driver’s education course stand to benefit, too, under several insurers’ plans.
Loyal customers who have been with them for years (Safety, Amica, Commerce); those with low mileage (Electric, Liberty Mutual); even households with students who earn good grades (Amica, Travelers of Mass., MetLife Auto & Home) are also eligible for breaks from some carriers.
Policyholders who buy a policy from Encompass at least seven days before their current policy expires can get a break from that carrier.
Travelers of Mass. (Premier) will save owners of hybrid cars some green.
In addition to dangling discounts and credits in front of customers, companies say they will compete by offering additional coverages. These include disappearing deductibles (Hanover, Safety, Amica); new car replacement coverage (Commerce, Safety, Amica, Liberty Mutual, Hanover, MetLife Auto & Home); auto loan/lease gap coverage (Hanover, Safety, Amica, Encompass) and enhanced towing and substitute transportation.
MetLife Auto & Home is throwing in identify theft resolution protection for free.
Market leader Commerce, which will continue its popular program of discounts to members of the American Automobile Association, wants to enhance that package by also offering these AAA members coverage for laptops and cell phones and coverage if their pet is injured or dies in a crash. The pet coverage comes after Progressive Insurance announced last week that it would begin offering similar coverage for customers’ dogs or cats at no additional premium. Progressive does not now write private passenger auto in Massachusetts but it is rumored to be one of the carriers contemplating entry.
Some changes in these filings are likely before they become final. Carriers have until Nov. 27 to check their competitors’ filings and amend their own. Commissioner Nonnie Burnes can also seek changes in any filings she finds unfair or not in compliance with her managed care regulations.
The rates are scheduled to go into effect April 1, 2008 and must be offered for at least 30 days. After that, any insurer can file amended rates whenever it wants.
New carriers looking to enter the market next spring have until Feb. 15, 2008 to file rates. Thus far, only one new carrier— Peerless, a unit of Liberty Mutual— has announced it will enter the market.
Mancini said his group, MAIA, will do some research and then let agents know what commissions the filings include for independent agents, who currently control nearly 95% of the market. The companies writing under-1% of the market filed for an average 13% commission.
In addition, rates for the approximately 4% of drivers insured in the state’s high risk pool would go up 9.3% on average, according to a previous industry filing with the state.
Under state rules, no rates for any individual driver can go up more than 10%.