Mass. AG Calls for 10% Auto Rate Cut

Massachusetts Attorney General Thomas F. Reilly will seek at least a 10 percent cut in the state’s auto insurance rate when he makes a formal recommendation later this month.

Reilly said auto insurers enjoyed hefty profits at the expense of drivers last year and it’s time for drivers to recover some of the money.

“People are absolutely being crushed by the cost of operating their cars,” Reilly told The Associated Press. “The insurance industry asking for a one-tenth of one percent reduction is an insult. Drivers are entitled to at least a 10 percent reduction in their auto insurance.”

The Automobile Insurers Bureau of Massachusetts is seeking a 0.1 percent rate cut for drivers next year, citing declining damages claims in part because of anti-fraud campaigns — marking the first time in recent memory the industry has asked for a cut instead of an increase.

Reilly said that industry recommendations would translate into about a dollar savings on the average car insurance policy of about $1,000.

His recommendation would return a least $100, and possible more, to car owners if it is approved. Reilly, a Democratic candidate for governor, said his office has plenty of evidence to back his recommendation.

“We have enough right now to blow their number right out of the water,” he said. “We’re going to keep on digging until we can get every penny.”

Reilly’s office submitted its preliminary findings Monday at the annual public hearing on car insurance rates held by the state Division of Insurance. Reilly has until the end of September to make a formal recommendation.

Both the industry’s recommendations and Reilly’s proposal will go to Insurance Commissioner Julianne Bowler, who is scheduled to set the final 2006 rate in December.

Insurers say their modest recommended cut recognizes a significant drop in the claims presented by Massachusetts policyholders in 2004.

Insurers also point to campaigns by the industry and law enforcement that aim to reduce fraudulent claims, including a crackdown in the city of Lawrence that insurers say has reduced claims by $28.7 million there in 2004.

But Reilly said the drop in claims coupled with anti-fraud efforts should translate into a much bigger savings for drivers than the industry is suggesting.

“Those companies received a windfall last year at the expense of drivers. Something has to give,” he said. “It’s jaw dropping what’s happening to the individual car owner.”

Nationwide, the Insurance Information Institute estimates premiums will rise 1.5 percent on average this year, the smallest increase in five years. The average premium nationwide for 2005 is expected to be $870, up $13 per vehicle, the institute said.

Republican Gov. Mitt Romney has proposed changes in the auto insurance system in Massachusetts to encourage competition, including deregulating the industry to let companies set their own rates.

Reilly also said he supports competition in the auto insurance industry and has pushed for changes in the law to more evenly distribute bad drivers among insurers.

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