On October 5, Insurance Commissioner Nonnie Burnes issued regulations that provide a framework for a smooth transition from a market in which the commissioner sets the rates to one in which the companies propose their own rates.
“Commissioner Burnes continues to blaze a sorely needed path to reform and competition for auto insurance buyers in Massachusetts,” said Frank O’Brien, vice president and regional manager for PCI. “These are exciting times for consumers, agents and insurance companies and we look forward to working with all stakeholders to implement these important changes. We all agree that the goal is to have rates that are fair to consumers, maintain a small residual market, and a low number of uninsured drivers in Massachusetts. In order to achieve this we need a healthy, robust and flexible auto insurance market in which insurers are encouraged to be innovative in the products and services that they offer.”
The final regulations call for a one-year transition from April 1, 2008 through March 31, 2009. According to a summary of the regulations, the rules make driver experience and driving records the primary rating factors, and permanently ban insurers from using gender, marital status, education, occupation, homeownership and other socioeconomic factors for rating and underwriting. The use of credit scores is also banned, but will be studied further during this transition period. The rules preserve existing subsidies for urban drivers, facilitate comparison shopping for consumers, and lay out procedures for the commissioner to use regulatory authority to reject perceived "excessive" and discriminatory rates.
“While we are disappointed in the commissioner's decision to ban the use of credit information in insurance underwriting and rating,” said O’Brien, “we are encouraged by the commissioner's announcement that the Division of Insurance will comprehensively examine the issue.”
PCI is composed of more than 1,000 member companies, representing the broadest cross-section of insurers of any national trade association. PCI members write over $194 billion in annual premium, 40.1 percent of the nation’s property/casualty insurance. Member companies write 51.3 percent of the U.S. automobile insurance market, 39 percent of the homeowners market, 32.1 percent of the commercial property and liability market, and 38.7 percent of the private workers compensation market.