Mass. AG Says State Auto Insurance Web Site Misleads Consumers

April 3, 2008

A state Web site intended to educate consumers about Massachusetts’ newly deregulated auto insurance market instead gives them inaccurate rate comparisons, Attorney General Martha Coakley said Tuesday on the day the new competitive system took effect.

Coakley, who plays an adversarial role to Insurance Commissioner Nonnie Burnes in overseeing Massachusetts insurers, argued the site misleads drivers into thinking that they’re using an effective tool for comparison shopping among the state’s 19 insurers.

The site is only 20 percent to 40 percent accurate in advising which insurer offers the best rates, based on tests in which data about typical drivers were entered into a rate-comparison database, Coakley said.

The state’s chief legal officer called on Burnes to revamp the Division of Insurance-run Web site. Coakley stopped short of asking Burnes to take it down.

“The Web site as it is currently maintained is not only not helpful, it’s misleading,” Coakley said at a news conference on the day the state switched to a system in which auto insurers, rather than the regulators, set rates for the first time in three decades.

(Coakley’s criticism came on the day managed competition went into effect and weeks after insurance agents urged Burnes to revamp the site. The agents told Burnes that the site, which only asks six questions of drivers, is extremely limited in its options and does not produce accurate premiums.

“While we understand the intention of the site is to assist consumers in the new managed competition environment, in our judgment, it is resulting in a more confusing experience,” Frank Mancini, president and chief executive officer of the Massachusetts Association of Insurance Agents, advised Burnes in a letter in early March.)

Burnes, who has overseen the shift, said she takes Coakley’s concerns about the Web site “very seriously.” Burnes, an appointee of Democratic Gov. Deval Patrick, said she hoped to meet with Coakley — also a Democrat — and will work with her “to ensure that Massachusetts consumers have access to the information they need to make informed auto insurance choices.”

Burnes, who has clashed with Coakley on other issues during the market shift, defended the Web site, calling it “an important tool and useful starting point” for consumers.

The Web site — http://www.mass.go utorates — has had more than 600,000 hits since it became operational Feb. 19. As of Tuesday, drivers seeking new policies and those facing annual policy renewals can shop around for the best rates.

The Web site allows consumers to enter data about their driving records and vehicles to get sample premium quotes from insurer. The site advises consumers actual quotes from insurers “may differ significantly” from the samples.

Coakley said those warnings don’t make up for the fact that the sample quotes frequently don’t reflect the rate an insurer would actually offer an individual. Rates can differ from the sample quotes because the Web site doesn’t factor in certain rate-setting criteria that insurers consider, and doesn’t account for discounts, such as reduced rates for married couples sharing a policy.

For example, data entered into the site’s comparison-shopping tool for a married couple from the Boston suburb of Newton with two vehicles yielded results that indicated that one specific insurer would offer the best annual rate of $1,462. But Coakley said calls to insurers revealed that rate was underestimated, and a different insurer that the Web site listed as the most expensive actually offered the best rate _ one that turned out to be $1,488.

Coakley said her office has created a phone line and e-mail address for consumer feedback on the state’s auto insurance market: 1-866-928-8667, and InsuranceFeedback@state.ma.us.

Kimberly Haberlin, a spokeswoman for Burnes and the insurance division, said the site is similar to comparison-shopping auto insurance sites in other states. She also said the site makes it “abundantly clear” that the tool does not calculate discounts.

“The site is not a premium calculator, and clearly states that it does not provide rates,” Haberlin said. “Each driver’s situation is unique _ that’s why we have been and will continue to urge consumers to talk to a company or an agent to better understand their choices.”

Consumer advocates echoed Coakley’s complaints about the Web site, while an insurance industry organization criticized the attorney general.

Deirdre Cummings, legislative director of the consumer-oriented Massachusetts Public Interest Research Group, said the Web site has added to the confusion for Massachusetts consumers who aren’t used to shopping around for the best rates and seeing advertisements from auto insurers.

“All those things have combined to create the potential for a perfect storm of disaster for consumers,” Cummings said.

James Harrington, director of the Massachusetts Insurance Federation, accused Coakley of bad timing in criticizing the Web site on the April Fool’s Day shift to a new market. Harrington said Burnes “has organized an aggressive outreach campaign” to educate consumers.

“To wait until the day of transition to criticize one component of the Division of Insurance public outreach effort is simply over the line,” Harrington said.

Harrington said Coakley “has opposed auto insurance competition since day one.”

Coakley, who said she supports the market reforms, has argued that the rate reductions proposed by insurers would not drive premiums down as far as Burnes has estimated. She has also challenged some of the rate proposals that Burnes ultimately approved.

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