Mass. Insurance Chief, AG Differ Over How to Regulate Auto Rates

January 11, 2008

Massachusetts Insurance Commissioner Nonnie Burnes and Attorney General Martha Coakley are at odds over how best to regulate the state’s new competitive auto rates.

Coakley thinks some insurers are being stingy with their rate cuts and wants to dig deeply into individual insurance company rate filings by obtaining background documents from the carriers.

Burnes say she’s got everything under control and Coakley’s tactics would only delay the day when consumers enjoy the fruits of a competitive system.

Burnes appears intent on keeping the rate approval process moving forward so carriers can begin marketing their new rates in time for the April 1 start date for competitive rating.

The rates for 14 of the 19 insurers writing private passenger auto have been approved after some review and revisions. But the rates for a few other insurers, including some of the larger writers, remain under scrutiny.

Hearings began this week into the rates of Commerce, the state’s largest auto insurer. Hearings into the filings of Arbella Mutual Insurance Co., Safety Insurance Co., Premier Insurance Co. of Massachusetts, and Hanover Insurance Group are scheduled for later this month.

The insurance department has already approved the filings for Arbella and Safety but they are being further reviewed at Coakley’s insistence.

Commerce has filed for an average decrease of 6 percent. Coakley claims the company could lower rates more than that.

The different approaches of the two public officials have been on display in recent legal moves and at a hearing on Commerce’s rates this week in Boston.

At the hearing, Burnes oversaw questioning of Commerce officials by Assistant Attorney General Peter Leight. She appeared impatient with his lengthy questioning, at one point remarking that motorists are “never going to get decent rates” if the state prolongs the process.

The differences between the two also played out in legal maneuvering by Burnes, a former judge, and Coakley, a former prosecutor.

Coakley’s office had wanted more ammunition to question officials of Commerce and the other insurers about their ratemaking. The attorney general had first sought to obtain background materials from Commerce by asserting the legal right of discovery. After Burnes, rejected that assertion, Coakley issued subpoenas to Commerce for certain documents. Burnes also blocked that move.

Coakley and consumer advocates say Burnes’ moves could restrict her agency’s ability to represent consumers in rate hearings.

“Our goal in calling for hearings on Commerce’s and other insurers’ rate filings was to bring transparency to the rate-setting process under the new managed competition system,” Coakley said. “We are very concerned that our office’s inability to acquire appropriate information is likely to render the hearings ineffective and does a disservice to consumers.”

This is not Coakley’s only attempt to expand her office’s consumer advocacy reach. Legislation that included a provision to give the attorney general the power of discovery died in the Legislature last session, although it could be revived.

The Massachusetts Association of Insurance Agents, opposed that legislation. Frank Mancini, president and chief executive officer of the trade group, said the denial of discovery was a “victory for consumers and agents” for several reasons.

First, he said, the resulting delays brought about by discovery could have meant that the insurers with rates subject to hearings would not have been able to compete for business with their lower 2008 rates come April but would have had to use their higher 2007 rates. Given that the carriers under review represent almost 40 percent of the marketplace, that could have denied consumers the benefits of competition and put those carriers at a competitive disadvantage, he said.

Also, Mancini said, had Coakley been granted the right of discovery, he believes she would have gone hunting after agent commission data. “I have been telling our members that if that discovery had passed, every one of their commission agreements would have been on Coakley’s desk,” he told Insurance Journal.

Before the Commerce hearing began, the insurance department officially cleared the filings of four insurers, bringing the total now approved to 14.

“The rates on file have withstood the Division’s extensive review process and mark the beginning of a new era of consumer savings and consumer choice in the state’s auto insurance market,” said Burnes.

The insurance department said it continues to review the proposed rates of the remaining insurers.

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