Where Consumer, Once, Was King

It’s puzzling to ponder the thought process of a former judge who decides it’s in the public’s best interest to mothball the courthouse and replace judges with defendants empowered to hear any cases against them.

But such is the situation in Massachusetts where last month, over the repeated objection of the state’s trade group for insurance agents, Insurance Commissioner Nonnie Burnes finally killed off the long-standing program through which drivers could appeal insurance surcharges for accidents in which they were more than 50 percent at fault. That program was long considered a necessary component of the Bay State’s quirky, former auto insurance system in which the state set all insurance rates but companies assigned surcharges.

It has been a move talked about since last year, when the Bay State launched its “managed competition” system, where companies set their own rates, albeit within a range established by regulators. Implicit in that switch was the understanding that – since rating is now the domain of insurers and consumers are free to leave if they dislike rates – there’s no need to maintain the system. Plus, the appeals process was legally nullified when managed competition was passed by lawmakers.

There was a lot to criticize about the appeals system. It was a relic. (Massachusetts was the only state to have such a process.) It was costly both to the state and consumers. (Whether won or lost, an appeal cost $50.) It had a tremendous backlog. (At some points, a hearing required a two-year wait.) And those who appealed still ended up paying much higher premiums for a long time, although they could later get refunds if their appeals were upheld.

But there was a lot right, too. Chiefly, it was this: More than 50,000 appeals were reviewed each year, and more than 45 percent of consumers who appealed won.

To put it another way: Insurance companies, when it came to overcharging customers, were wrong to do so about half the time. It’s difficult to find a better reason in favor of keeping the former system. And it’s something that insurance agents, who have a legal duty to their customers, should be deeply concerned about.

A shell of that former system will remain, a “streamlined” appeals process where insurers, rather than the state, review disputed decisions. The new procedures will be free, and must be completed within 30 days or the Division of Insurance can take disciplinary actions against the company.

But it begs the question: If insurers couldn’t be trusted to do this correctly in the past, why can they be trusted to do so now?

The hallmark of Massachusetts new system is that dissatisfied consumers can walk away from an insurer they feel has mistreated them. However, the state has no right to walk away from the responsibility to ensure the system is fair.

Hopefully, the former judge realizes this; above all, that’s what consumers really deserve and want.