Industry Seeks Clarification of Mass. Residual Market Changes; Commerce Touts Own Transition Plan

September 12, 2004

Massachusetts Insurance Commissioner Julianne Bowler has asked Commonwealth Auto Reinsurers (CAR) to revise its proposed residual market plan but CAR governing committee members have questions they need answered before they implement the changes she requested.

The new plan, known as the Massachusetts Assigned Insurance Plan, takes an assigned risk plan approach to dealing with the private passenger residual market.

At a special meeting on Sept. 9, the CAR governing committee decided to request clarification from Bowler before moving to comply with her request for amendments to its MAIP plan. She gave CAR a Sept. 24 deadline.

Bowler has asked CAR to clarify the rules so that drivers with good driving records are not harmed by the changes in the residual market; adopt a so-called “Clean in Three” proposal, under which experienced drivers with no-fault accidents or moving violations in the most recent three years cannot be placed in the assigned risk plan; and introduce incentives that will encourage insurers to create new agencies in urban areas.

She also asked for tougher anti-fraud incentives and steps to reduce consumer confusion during any transition from CAR to the MAIP.
CAR executives expressed uncertainty over the transition rules involving high loss ratio agencies and questioned what new claims handling standards and servicing carrier and producer requirements the commissioner had in mind.They also sought clarification of the underwriting guidelines Bowler believes appropriate for the “clean in three” proposal.

Noting the confusion over the plan, Commerce Insurance, the state’s largest auto writer and an outspoken opponent of the manner in which the MAIP is being implemented, offered its own solution to replace the transition plan under consideration.

Arthur J. Remillard, Jr., Commerce chief executive officer, maintained that his company’s alternative plan “will resolve the issue of high risk loss allocation while eliminating the confusion and complexity” of the transition plan that Bowler wants reviewed. Remillard’s proposal was put on the agenda for future discussion.

Bowler has scheduled a hearing on whatever changes CAR eventually recommends for Oct. 4.
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