Despite Residual Market Changes in Mass., Commerce Insurance to Offer 5% AAA Group Discount

January 5, 2005

Despite new rules restricting its ability to reinsure individual high risk members of groups in the residual market, Commerce Insurance Company plans to again file with the Massachusetts Division of Insurance a five percent discount from the 2005 private passenger automobile fixed and established rates for American Automobile Association members in the state.

If approved by the Division of Insurance, the discount would apply to 2005 Massachusetts private passenger automobile policies for members of Massachusetts AAA clubs who are insured through Commerce Insurance including: AAA Southern New England, AAA Merrimack Valley and Automobile Club of Pioneer Valley. Additionally, members of Automobile Club of Berkshire County, which merged with AAA Southern New England effective July 1, 2004, are eligible for the discount.

Commerce, headquartered in Webster, Mass., is the state’s largest writer of private passenger auto.

There had been speculation that insurers would stop offering group discounts after Massachusetts Insurance Commissioner Julianne Bowler approved, over the protest of Commerce and a few other insurers, a new assigned risk plan to be known as the Massachusetts Automobile Insurance Plan (MAIP).

Several insurers had protested the new MAIP rule that prohibits placement of risks receiving group discounts in the residual market. Bowler, however, upheld this rule, which critics maintain could reduce or end companies’ willingness to offer group discounts.

The rules for the new plan went into effect Jan. 1, 2005 and are designed to result in full implementation by Jan. 1, 2008.

The MAIP will place high risk drivers with insurers in proportion to insurers’ voluntary market share, ending the assignment of involuntary agents’ policyholders to insurers through a complicated subscription formula that critics claimed was inequitable and contributed to insurers’ reluctance to write in the state.

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