Mass. Attorney General Says Auto Rates Higher Under Competition

December 13, 2007

Massachusetts Attorney General Martha Coakley says the state’s new managed competition auto insurance system is not lowering average rates for 2008 below what they would have been under the old system where the state set all rates.

In another in a series of bulletins she has issued on auto rates, Coakley criticizes the state’s largest auto insurers for being timid in their rate filings and relying on discounts for preferred drivers rather than lowered manual rates to pass along savings to drivers.

She maintains that the old fix-and-establish system would have cut the average rate for all drivers by double digits but that the average rate reduction under managed competition turns out to be only about 6 percent. Insurers, including the four largest (Commerce, Safety, Metropolitan and Premier) — which together control about 60 percent of the market — “are still seeking surprisingly similar rate changes” (an average reduction of about 6 percent) and many carriers did not take advantage of a window of opportunity to materially amend their initial Nov. 17 rate filings, according to her staff’s analysis.

“Although the commissioner of insurance invited the insurers to view each others’ filings and make changes to their own, very few changed their rates to offer better deals for consumers. Overall, rates were changes by less than 1 percent,” stated Coakley.

She said that in addition to the “disappointing average rate decreases in many company filings,” several companies, including Commerce and Liberty Mutual, have actually increased their manual rates by about 10 percent, bringing them close to the cap placed on increases by Insurance Commissioner Nonnie Burnes.

Carriers are then applying various loyalty and other discounts for preferred customers to these manual rates. This could mean that rates for drivers in some territories, possibly including urban areas, will not benefit from the discounts and will see their premiums go up in 2008, not down.

She said it is unclear how some companies calculate manual rates and “it is possible that some decreases may not be as low as they are now being advertised.”

“We are concerned that many consumers will experience unexpected rate increases next year,” the attorney general’s bulletin stated.

She said that while she supports the goal of competition in the automobile insurance market, “it is the attorney general’s responsibility as the ratepayer advocate to ensure that competition is introduced in a way that does not have a negative impact on consumers.”

She said her office will continue to review the industry’s filings and seek hearings on certain ones “to provide for a transparent process so that consumers can make an informed decision when they purchase insurance.”

Her office already announced it is challenging the rate filings of Commerce, Safety and Premier and still reviewing Metropolitan’s.

The attorney general’s team has until December 17 to make final decisions regarding the remaining rate filings.

The Division of Insurance is also reviewing all rate filings.

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