Mass. Regulator Rules Auto Rates Must Be Set By State Again

By | August 14, 2006

As expected, Massachusetts officials have confirmed that the insurance commissioner, not competition, will set auto insurance rates for 2007.

In a four-page decision handed down Aug. 10, Insurance Commissioner Julianne Bowler rejected arguments that the current marketplace is compatible with insurers setting their own rates and ruled that the state would once again assume the responsibility for rate setting for 2007.

By law, the commissioner is required every year to hold hearings on whether the marketplace could sustain competitive pricing. But the decision has always been no and the state has proceeded to accept rate recommendations and hold hearings into setting uniform rates for all insurers.

“If competition is to succeed for all Massachusetts policyholders, it must be developed within a framework that will avoid dramatic rate increases for urban and inexperienced operators. No speaker has presented a comprehensive alternative to fixing and establishing rates that would achieve that goal,” Bowler wrote in her decision.

Some insurers, members of the American Insurance Association, maintained that an anti-trust analysis of the Massachusetts auto insurance market suggested that competition is sufficient to support a move to competitive rating. Others, including Liberty Mutual, argued that the time was right to introduce “regulated competition” into the market. But the State Rating Bureau, Attorney General and the Massachusetts Association of Insurance Agents said the system needs residual market reforms and additional consumer safeguards before a transition to competitive rating should be attempted.

Bowler said she concluded that full competitive rating in 2007 would not be desirable at this time. “Institution of competitive rating without thoughtful planning and carefully structured implementation would benefit neither consumers nor insurers. I find that present conditions are such that competition, if implemented in 2007, would be insufficient to assure that rates will not be excessive and might be so conducted as to be destructive of competition,” she wrote.

Having anticipated the decision, the industry’s own rating bureau has already filed its recommendation for an average 3.7 percent rate reduction for 2007.

The SRB, which is the consumer arm of the insurance department, and the Attorney General have yet to make their 207 rate recommendations.

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