Mass. Accepts 8 Auto Insurers’ Rates; Reviews of Others Continuing

By | December 21, 2007

The 2008 rates for eight auto insurers in Massachusetts have been cleared by state insurance officials, while those of at least 11 others remain subject to further review.

Insurance Commissioner Nonnie Burnes has given the green light to rates with average decreases filed by State Farm (-1.6%), Fireman’s Fund (-2.5%), Quincy Mutual (-10.0%), Safety (-6.3%), OneBeacon (-7.2%), Amica (-7.9%) and Farm Family (-8.2%).

She also accepted the filing of specialty risk carrier Praetorian, which filed to be a servicing carrier for the residual market.

The move means that these eight insurers can begin to offer consumers the rates, discounts and coverages included in their separate filings that go into effect April 1, 2008, according to the Division of Insurance.

“After painstaking review, we have concluded that these insurers have fulfilled the division’s requirements and should be allowed to compete for their customers by offering better rates, products and choices,” said Burnes.

April 1 is when the state officially enters the world of managed competition. Under managed competition, insurers submit individual rate filings as opposed to the previous system where the state set the rates for all insurers.

Most of these insurers whose rates have already been accepted have small market share. The rates for several of the leading insurers, including the biggest, Commerce Insurance, remain under review by the division. Citing concerns about the company’s use of its AAA group discount and bodily injury coverage in its rating plan, Burnes has scheduled a Jan. 9 hearing on Commerce’s filing.

Also, at the request of Attorney General Martha Coakley, Burnes has scheduled hearings into filings by several other carriers.

According to the insurance department, the average reduction across 19 companies for policies effective in April 2008 is -7.8%.

Burnes said that the division oversaw an independent actuarial firm’s evaluation of each insurer’s filing. The team projected future company losses, expenses and profits to devise separate indicated rates. In each instance, the actual rates the companies proposed were lower than the indicated rates.

The insurance department and Coakley’s office disagree on what some of the filings contain, with the attorney general maintaining some have padded expenses and profits and do not lower rates as much as Burnes and the insurers contend.

Burnes has agreed to hold hearings at Coakley’s request on filings by Safety, Premier, Hanover and Arbella, even though Burnes has already indicated she thinks Safety’s filing is acceptable.

While Coakley and Burnes may be at odds over some filings, the insurance industry sees Burnes’ actions as a positive signal to not only Bay State consumers but also insurers contemplating entry into the market.

Frank O’Brien, regional vice president for the Property Casualty Insurers Association of America, said that the insurance department’s own reviews of rate filings have been thorough and the results will benefit consumers.

“The fruit of this effort will be seen as good drivers find that there are significant rate reductions available and all drivers benefit from coverage options that are being offered in Massachusetts for the first time,” O’Brien said. “The move to competition is significant and the nation is watching to see how the environment will develop. If competition is given a chance to develop, companies that are not currently doing business in Massachusetts will see that the Commonwealth is worthy of a second look.”

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