Gov. Romney, AG Reilly and Industry Differ Over Mass. Auto Reform Plan

By Theo Emery | November 16, 2005

Massachusetts Gov. Mitt Romney and Attorney General Tom Reilly sparred over auto insurance this week, with Reilly saying the governor’s reform plan would create chaos for drivers and Romney accusing Reilly of failing as a leader because he had no plan of his own.

The Republican governor testified before a legislative committee on Tuesday, urging lawmakers to adopt his proposal to deregulate the auto insurance industry and allow more providers to do business in Massachusetts.

Even before Romney appeared before the panel, however, the Democratic attorney general, who plans to run for governor next year, attacked his plan, saying it offers little rate protection for consumers. Reilly, who did not testify before the committee, sent a letter to lawmakers saying they should vote against Romney’s plan.

“If that bill which has been proposed by the governor goes into effect, all hell will break loose in this state,” Reilly said at a morning news conference.

If the governor’s plan were adopted, he said, rates would shoot up. Urban drivers could see their rates double under the governor’s plan, Reilly said, adding that the state needs to introduce market competition more slowly.

The heightened rhetoric came amid a growing clamor for auto insurance reform on Beacon Hill and an advertising war on the airwaves between reform supporters and opponents.

Romney, who has yet to declare whether he will seek re-election, told a packed hearing room that he would accept any range of reform proposals, as long as it scrapped the state’s unique regulatory scheme and introduced more competition.

“There is enormous resistance to change because a few companies, a handful of companies, are making a lot of money by keeping things exactly the way they are, and they do not want to see any change whatsoever,” he said.

Under the state’s unique regulatory framework, the state Division of Insurance sets a baseline rate for all companies. Good drivers get credit for clean records, but they also subsidize bad risks, resulting in rates that are higher than the national average.

In his capacity as a regulator, Reilly plays a role in the rate-setting process. He is currently seeking 18 percent lower premiums for next year, while insurers are seeking a 0.1 percent cut. That amounts to a $200 difference on the average premium, which is now $1,099.

In June, Romney proposed trying to create competition by abandoning what he called a “Soviet-style” system and luring discount insurers such as Progressive and Geico to Massachusetts.

The legislation is the subject of a fierce television ad war between insurance companies operating under the existing system and those supporting Romney’s approach, with both sides accusing the other of distorting the truth. The Legislature adjourns for the year on Wednesday, Nov. 16 clouding the prospects for any change this year.

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