Commerce Insurance Says Mass. Doesn’t Need Assigned Risk Plan

The state’s largest auto insurer and the lead plaintiff in the fight against Massachusetts Insurance Commissioner Julianne Bowler’s effort to install an auto insurance assigned risk plan is hoping that Bowler will find an ARP is not necessary in light of declining insurance rates and changes that have been made to the state’s auto insurance residual market.

“Although the court concluded that the commissioner has the authority to implement an assigned risk plan, the decision by no means requires her to do so,” said James A. Ermilio, executive vice president of Massachusetts insurance operations for The Commerce Insurance Company.

“In fact, since the Romney-Healey Administration first presented their assigned risk plan in 2004, insurance premiums have fallen markedly and are expected to fall again in 2007, while the residual market deficit has plummeted and fraud fighting initiatives have proven extremely successful. In addition, the commissioner has redistributed the involuntary market burden among insurers.”

The Massachusetts Supreme Judicial Court ruled in the case of The Commerce Insurance Company v. Commissioner of Insurance that the commissioner has the authority to create an assigned risk plan to manage the allocation of high-risk drivers in the state. Bowler wants the ARP to replace the current Commonwealth Auto Reinsurers plan under which high risk business is managed by assigning agents to insurers. Under an ARP, individual high risk drivers are assigned to insurers.

In a prepared statement, Ermilio argued that the reassignments of CAR business that took place earlier this year, along with the fraud fighting activities that have contributed to a lowering of rates make a revamp of the residual market unnecessary.

“Taken together, these changes remedied the perceived inequities in the system and have greatly eliminated the need for the overhaul proposed by the Romney-Healey Administration. It would make no sense for the commissioner to continue with her outdated plan to implement an assigned risk plan, which consumer advocates and legislators have characterized as a ‘consumer unfriendly’ system,” said Ermilio.

“Consumers would find themselves rejected by companies of their choice and assigned involuntarily to another carrier for reasons such as credit, education or other non-driving related factors.”

In the past, Ermilio has characterized Bowler’s proposal as potentially disruptive for agents, consumers and the industry. He has also maintained that it makes it easier for companies to leave the state.

Last month, Bowler declined to reappoint a Commerce representative to the board of the residual market organization. She told Insurance Journal she was not singling out Commerce because of its opposition to her plans but has consistently “cycled companies on and off” the CAR board.

The Commerce Group, Inc. is headquartered in Webster, Mass. Its property and casualty insurance subsidiaries include The Commerce Insurance Company and Citation Insurance Company in Massachusetts, Commerce West Insurance Company in California, and American Commerce Insurance Company in Ohio.

Source: The Commerce Insurance Group