Coakley: Car insurance plan needs major tune-up

Mark Jewell

Attorney General Martha Coakley said last Thursday that the state’s insurance commissioner hasn’t gone far enough to protect consumers in proposing rules to open Massachusetts’ regulated auto insurance market.

Coakley recommended changes she said are needed before state Insurance Commissioner Nonnie S. Burnes drafts a final version of the rules next month.

Coakley wants stronger language banning auto insurers’ use of consumers’ credit scores in setting individual rates and deciding whom to cover.

Coakley also said the proposed regulations would unfairly undercut her office’s ability to review companies’ rate filings, and wouldn’t give consumers enough tools to shop for the best deal.

The attorney general had previously said the industry might not be ready for an open market, and suggested the current system be kept in place for at least another year.

The market transition is expected to begin next April and be completed by March 31, 2009 — a period when the credit scoring issue would be studied under the proposal from Burnes, a former Superior Court justice appointed to the insurance post in February by Gov. Deval Patrick.

Last Thursday, three weeks after Burnes issued her proposed regulations, Coakley, also a Democrat, offered recommendations at a public hearing and said a ban on the use of credit scores is needed.

Burnes’ proposed regulations “are inconsistent with one of the commissioner’s four guiding principals: fairness to all drivers through the prohibition of the use of socio-economic factors,” Coakley said in prepared testimony presented at the hearing by Glenn Kaplan, head of the insurance division in Coakley’s office.

A spokeswoman for Burnes did not immediately return phone messages seeking comment.

Burnes proposed banning insurers from using credit information for setting premiums during the one-year market transition, but would allow use of such data during that period in deciding whether to cover an individual.

Meanwhile, Burnes called for study of the credit scoring issue, saying the implications spread beyond the auto insurance market to other lines of insurance.

Under the shift to so-called managed competition, companies would file their own rates with regulators, who would review them.

Nineteen insurers currently write auto insurance policies in Massachusetts — far fewer than in most states, and nearly half the number that participated in 1990. Massachusetts is the only state where state regulators, not the market, set car insurance rates.

Burnes’ proposal would ban factors in rate-setting including income, marital status, education, occupation and homeownership. Insurers would be limited to considering a motorist’s experience and driving record as primary factors in setting rates.

Insurance companies have welcomed the shift toward a more open market, but some have opposed strict limits on which socio-economic factors they can consider. They argue that such factors can offer a sound basis for determining how likely a driver is to file an accident claim.

(Associated Press)