Even if the National Association of Independent Insurers is busy merging with the Alliance of American Insurers (See related national article), its general counsel, Gerald L. Zimmerman, has been keeping an eye on events. He blasted Massachusetts Attorney General Thomas F. Reilly’s challenge to a recently approved 2.5 percent increase in auto insurance rates (See IJ Website Jan.6) as “an example of how politics overshadows common sense in the Bay State.”
“This move highlights the fact that the rate-setting process in Massachusetts is driven by politics rather than market realities,” Zimmerman stated. “This type of political grandstanding certainly does not lead to insurers considering Massachusetts as a market to sell insurance and ultimately that lack of competition hurts policyholders.”
Reilly contends that the Division of Insurance erroneously agreed to use a new profit model in setting the rate increase, and appealed the DOI’s order to the state Supreme Judicial Court, a decision which will take months to be handed down.
“Mr. Reilly says he is concerned with the DOI’s acceptance of a change in the formula used to calculate underwriting profits,” Zimmerman continued. “This ‘business as usual’ attitude has resulted in an insurance market that for the past 20 years has been notorious for lack of significant competition and availability of coverage by most national writers.”
Although he agreed with Reilly’s statement that “consumers will be far better served by a market fueled by competition,” he added that it “certainly does not help head the state toward a competitive market for this already unnecessarily lengthy and adversarial rate-setting process to be dragged out even longer by this unnecessary, and we believe baseless, appeal.”
Zimmerman called the move a “prime example of overregulation and micromanagement” at a time when insurance fraud is costing Massachusetts insurers and consumers millions. The bulletin noted “it would create uncertainty in an already unstable market that could have a negative effect on the willingness of insurers to file for deviations or on the magnitude of any deviations offered – which in turn could hurt the state’s best drivers because they won’t be offered deviations or they are offered reduced deviations.”
“When Massachusetts drivers open their renewal notices, they can thank Attorney General Reilly in part for the fact those discounts aren’t there, or are smaller than they otherwise would be,” Zimmerman stressed. Pointing to New Jersey as an example of how a state can turn around a bad market situation by aggressively addressing the issues of fraud and rate setting, he indicated that, although the state had long been known as the country’s worst auto insurance nightmare, “recent legislative reform is resulting in a return of insurers to the state and voluntary rate reductions.”
“Stimulating competition, not stifling it, is the best way to fix a failing insurance market,” he continued. “We believe the first step in fixing the badly broken Massachusetts market and heading toward competition is to completely revamp the irrational and unfair residual market mechanism.”
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