NAII Letter to WSJ Calls for Mass. Auto Insurance Reform

December 23, 2003

In an open letter to Paul A. Gigot, Editor of the Wall Street Journal’s Editorial Page, the National Association of Independent Insurers expressed its strong support for reforming Massachusetts’ auto insurance regulations.

The letter, signed by NAII General Counsel Gerald L. Zimmerman, likened the situation to that in New Jersey before reforms were enacted last June and said, “Now Massachusetts is left alone as a ‘Soviet-style’ system that is ready to implode.”

Zimmerman said that following the passage of reforms in N.J. it had become “an example of how effective legislation and regulation can improve even the most infamous regulatory mismanagement.” He cited the recent developments in the state (See IJ Website Dec. 22) as proof of what can be accomplished when regulators, insurers and consumers associations work together.

“The same thing could begin to happen in Massachusetts if regulators begin to address some of the problems found in the current environment,” Zimmerman continued. “For example, regulators need to fix the CAR system, which distributes high-risk and underpriced policyholders unevenly among participating companies. CAR and the accompanying state-set rate process have produced an unhealthy and unfriendly market with only 19 auto writers and a concentration of most business among 10 writers, which account for 90 percent of the market share.”

The letter warned that, “Massachusetts reform couldn’t come a moment too soon. With insufficient capital and capacity and only 19 auto writers in the market, a few market withdrawals or an insolvency of any size could cause the already stressed market to implode.”

It also noted that, “Insurers and agents backing reform are promoting the creation of the Massachusetts Automobile Insurance Plan (MAIP), an assigned risk system which would also include a credit system to encourage voluntary market writings by insurers in all territories and classes and bring the Massachusetts residual market plan in line with the rest of the country.”

Zimmerman expressed hope that reforms could be accomplished, noting that public opinion, the governor and the attorney general are all in favor of them. “Meaningful insurance reform could make the Massachusetts auto market a paradise — or at least another New Jersey,” he concluded.

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