AIA: Reform of Mass. Residual Market Vital

April 20, 2005

Reforms of the Massachusetts high risk auto insurance pool will benefit the market and consumers, according to the American Insurance Association (AIA).

Last Friday, AIA joined with the Massachusetts Insurance Federation (MIF) and other insurance trade associations and companies in filing a friend of the court brief defending the reforms pursued by Insurance Commissioner Julianne Bowler, which are being challenged in a lawsuit before the Massachusetts Superior Court.

On Dec. 31, 2004, Commissioner Bowler issued rules changing the auto insurance high risk pool from one in which agents are assigned to insurance companies to one in which individual risks are assigned to insurers, which is more common in other states. The reforms have been challenged in court by Commerce Insurance Company and others.

“The commissioner has the authority to and is moving to reform the outmoded Commonwealth Automobile Reinsurers system (CAR), which is Massachusetts’ residual automobile market,” said James Whittle, AIA senior counsel, who participated in the group that worked on the brief. “These reforms are essential to improving a system that is inequitable and has the effect of benefiting a few insurers at the expense of the rest.”

“These reforms are an essential start in reforming the entire market which is in crisis,” added Paul Moran, AIA vice president, northeast region. “The current system offers consumers few choices because the Massachusetts market has driven away many insurers.”

In addition to AIA, others joining in filing the friend of the court brief were the Massachusetts Insurance Federation, the Massachusetts Association of Insurance Agents, the Independent Property-Casualty Insurers of Massachusetts, Safety Insurance Company, United Services Automobile Association, Metropolitan Property & Casualty Insurance Company, The Hanover Insurance Company, Liberty Mutual Insurance Company, Property-Casualty Insurers Association of American, Encompass Insurance Company, Amica Mutual Insurance Company, Norfolk & Dedham Mutual Fire Insurance Company, National Grange Mutual Insurance Company, and Quincy Mutual Fire Insurance Company.

Together, the insurance companies participating in the brief write approximately 55 percent of the private passenger auto insurance business in Massachusetts.

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