Massachusetts Governor Mitt Romney renewed his call for reform of the state’s auto insurance system yesterday and vowed to introduce a plan to introduce competitive rating and modify the subsidies good drivers now pay.
Romney said his plan would include changes to Commonwealth Auto Reinsurers (CAR) and how it spreads the of high risk drivers among insurers, as well as elimination or reduction in the step rating subsidies that good and experienced drivers pay.
Echoing concerns expressed by industry executives, Romney said the auto system’s capacity woes were spilling over into the homeowners market.
The Romney plan was contained in a letter from Beth Lindstrom, secretary of consumer affair and business regulation, whose office oversees the Division of Insurance. DOI Commissioner Julianne Bowler has been working on a plan to revamp CAR and on recommendations for other changes to boost competition in the auto market for months.
In her letter, Lindstrom maintained that reform will not be easy. “However, it is clear that the Massachusetts automobile insurance system is broken and its Byzantine rules need to be corrected as soon as practicable,” she wrote.
Her recommendations include:
• Reforming CAR rules
• Educating consumers about and finding ways to reduce the subsidy that good or experienced drivers pay t isnure the very worst or inexperienced drivers
• Opening Massachusetts to competitive products and rates. This process should be “carefully developed so that classes and territories of consumers are not unbreasonably affected.” The plan might include a phase-in period, rate caps and limited flex bands on rating
• Filing specific legislation to combat fraud.
“The actions necessary to reform auto insurance are not mysterious; several states have enacted auto insurance reform with many or all of the above features,” Lindstrom told Romney, adding, “The challenge remains gathering the political will to overcome the lobbying and political clout of those insiders who benefit from the current system.”
Romney yesterday called for a special task force of legislators, industry and consumer officials to draft any necessary legislation, although several of his recommendations can be done through regulation.
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