Urban Lawmakers Eye Ban on ‘Proxies’ in Mass. Auto Insurance Pricing

By | October 22, 2007

Lawmakers representing urban drivers in Massachusetts are challenging the Patrick administration’s auto insurance plan, saying new regulations leave loopholes for companies to charge higher rates to minorities and the poor.

They are filing a bill that would significantly change the administration’s final set of rules that were created to open the state’s auto insurance market to greater competition and offer drivers more choices and better prices.

The rules bar insurers from considering income, marital status, education, occupation, homeownership and credit scores. Insurers are limited to considering a motorist’s experience and driving record as primary factors in setting rates.

But those rules create loopholes, such as considering membership in a professional organization as a proxy for occupation, according to Rep. Antonio Cabral, D-New Bedford, and Sen. Dianne Wilkerson, D-Boston, who last week were gathering co-sponsors for a bill that would limit rate-setting to a person’s driving record, which is how rates are set today.

“The final regulations state factors that insurers cannot use, rather than what they can use,” Cabral said. “Insurers will have proxy ways of targeting various populations for different rates.”

They said in a letter t to state Insurance Commissioner Nonnie Burnes that insurers could use eye color “as a proxy for race and national origin. Home value may serve as a proxy for income. The list of such proxies is endless.”

Senate Majority Leader Frederick Berry of Peabody, Senate Majority Whip Joan Menard of Fall River, and Sen. Stephen Buoniconti, co-chairman of the Financial Services Committee, are among co-signers supporting the bill.

David Falcone, spokesman for Senate President Therese Murray, indicated she wouldn’t stand in the way of the bill.

The measure faces opposition in the House from Speaker Salvatore DiMasi, who supports Burnes’ regulations, spokesman David Guarino said.

Massachusetts, home to 4 million drivers, is the only state where state regulators, not the market, set car insurance rates. Nineteen insurers currently write auto insurance policies in Massachusetts — far fewer than in most states.

Under the shift to “managed competition,” which doesn’t need legislative approval, companies would file their own rates with regulators, who would review them.

Consumers will be able to shop for auto insurance under the system starting late this winter. The new market is to begin next April, with the transition to be completed by March 31, 2009.

In an Oct. 5 letter outlining the regulations, Burnes said: “This new market is designed to produce lower rates for good drivers wherever they live … and to retain the low number of uninsured drivers in Massachusetts.”

Kimberly Haberlin, a spokeswoman for Burnes, added that good drivers “stand to benefit from more policy and product choices, greater rate savings and the commissioner’s continued engagement and involvement in the new system to ensure that consumers are protected at every turn.”

Insurers have welcomed the shift, but some opposed limits on which socio-economic factors they can consider. They argue such factors offer a sound basis for determining how likely a driver is to file an accident claim.

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