A task force appointed by Massachusetts Gov. Mitt Romney last spring has concluded that the state’s private passenger auto insurance system is heading for a crash and has promised to produce a legislative reform package by May 30 in time for consideration this legislative session.
An interim report by the task force takes aim at the state’s system of state-set uniform rates and the annual process by which those rates are imposed. The members agreed that this process should be transformed into a “more flexible” system that is “carefully crafted and sufficiently flexible to allow good drivers to be rewarded for the good driving risks that they are, facilitate choices for consumers regarding both the types of policies they purchase and from whom they can purchase them, and protect consumers from burdensome rates that could make insurance unaffordable.”
In the view of the task force, changes to the system should increase competition to ensure greater choice and reasonable pricing; attack various built-in incentives for fraud; address driving and road safety, and help educate consumers how to choose and bargain for coverage.
The task force expressed particular interest in reducing premiums for good drivers and providing consumers with more choice.
“Our review of the Massachusetts marketplace has identified ongoing problems that hamper the ability to achieve meaningful consumer choice,” the interim report stated. As evidence it cited the fall in the number of carriers from 53 in 1990 to only 19 today. That reduction in the number of insurers has taken place while the number of licensed vehicles has jumped by 20 percent. Five of the 19 carriers write 70 percent of the market.
According to the report, “the glaring absence of carriers results in fewer consumer choices, fewer outlets for producers, and a concentrated marketplace that is highly vulnerable to financial or natural catastrophe.”
Carriers are reluctant to commit capital in the state under the current system, a trend that also has a “preclusive effect” on the homeowners market, according to the report.
The report cites as another major issue the state’s highest in the nation claim frequency and it promised anti-fraud and safety proposals as part of its package. The report praises recent enactment of an anti-fraud law that makes the use of “runners” (who induce people to seek insurance benefits) a crime and cracks down on licensing of chiropractors and physical therapists.
In the areas of roadway safety, the task force is considering a primary seat belt law, improvements in the process for license revocations, stronger operator laws for teen and senior drivers, and streamlining the municipal process for lowering maximum speed limits.
In the area of consumer education, it is weighing creation of a Web-based auto insurance primer that would allow drivers to shop for price and coverage options.
The members of the task force have held 18 meetings with various industry, consumer, regulatory, law enforcement, trial bar and even auto parts and chiropractic representatives since getting started last April. They missed the original year-end deadline for issuing recommendations.
The task force is comprised of Senate Assistant Majority Leader Marian Walsh, House Financial Services Committee Chairman Ronald Mariano, Chief of Attorney General’s Public Protection Bureau Alice Moore, Secretary of Economic Development Ranch Kimball, Director of Consumer Affairs and Business Regulation Beth Lindstrom and Insurance Commissioner Julianne Bowler.
When the reformers are ready for Beacon Hill they will go before a new legislative panel, the Joint Committee on Financial Services. This committee was created by merging the Joint Committee on Banks & Banking and the Joint Committee on Insurance.
The new committee is co-chaired by Senator Andrea Nuciforo of Pittsfield, a newcomer to insurance battles, and Ronald Mariano of Quincy, who co-chaired the previous insurance panel. Vice chairs will be Senator Dianne Wilkerson and Representative Robert Spellane. New Senate members are Senators Stephen Buoniconti, Mark Montigny, Susan Tucker, and Scott Brown. House members are Representatives William Galvin, James M. Murphy, Peter Kocot, Robert Coughlin, Joseph Driscoll, James Welch, Joyce Spiliotis, Susan Gifford and Daniel Webster.
This is an edited version of a more complete story that appeared in the March 7, 2005 print edition of Insurance Journal East.
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