Mass. auto insurance overhaul is underway

Steve LeBlanc

Most drivers can look forward to a drop in their car insurance rates under the state’s new competitive system, but insurance officials couldn’t say how big the average decrease would be statewide.

Under the old system, where the state set one rate for all insurers, rates fell by 11.7 percent last year.

Consumer advocates have suggested that with the old system, car owners could have looked at another cut of at least 10 percent this year.

Under the new competitive system, most insurers are offering average rate cuts of less than 10 percent.

State Insurance Commissioner Nonnie S. Burnes said based on filings submitted by the state’s 19 insurers on Monday, at least 1.2 million motorists will see a 10 percent cut or more. There are about 4 million drivers in Massachusetts.

“The very good news is that every company filed for an average rate decrease,” Burnes said. “We are seeing what appear to be very substantial deductions for good drivers.”

Until now, Massachusetts was the only state where regulators, not the market, set car insurance rates.

The administration of Gov. Deval Patrick pushed to open the market, allowing companies to submit their proposed insurance products and rates to regulators, who will review them before offering them to the public.

The goal was designed in part to encourage more insurers to return to Massachusetts, but Burnes said the 19 insurers that submitted filings on Monday were already doing business in the state under the old system.

Rules bar insurers from considering income, marital status, education, occupation, homeownership and credit scores when setting their rates. Insurers are limited to considering a motorist’s experience and driving record as primary factors in setting rates.

But consumer advocates said insurers may use other information to reach the same conclusions, like offering discounts to potential customers who have homeowners insurance as a way to find out if they own property.

As a result, it’s possible that rates will vary widely even among drivers with good records, according to Stephen D’Amato, a consultant for the Cambridge-based Center for Insurance Research.

“There will be a lot of people who will think they are going to get deep decreases because they consider themselves the best drivers, who are going to be disappointed,” he said.

But Burnes said she’s seen the opposite. She said at least one company is offering discounts to people with renters insurance who may not own a home.

She said other companies are offering discounts for drivers who use public transportation or drive fewer miles, which could benefit urban drivers.

“What we are seeing is a wide range of rates and some very clever products that are both designed to keep [insurers’] customers and to provide benefits to allow people to control their own rates,” she said.

Burnes didn’t give an average statewide cut based on the filings. She also said there was no guarantee that the state would have cut rates by 10 percent if it had kept the old system.

“It’s become an a bit of an urban myth,” she said.

Insurers were quick to tout the lower rates they say they are able to offer most of their customers because of the changes in the system.

Travelers of Massachusetts said its plan would provide savings to about 75 percent of its customers, with more than one in three seeing savings greater than 10 percent and some saving as much as 20 percent or more.

The company also said it planned to offer new products, like 10 percent breaks for hybrid fuel car owners and good student driver discounts.

“We’re excited to extend competitive cost savings, discounts and services to customers in Massachusetts,” said Dick Welch, president and CEO of Travelers of Massachusetts.

The Hanover Insurance Group Inc., the ninth largest auto insurer in the state with 110,000 policies, announced that under its rate plan about 70 percent of drivers would see their rates decrease and 30 percent would see increases.

Of that 30 percent experiencing rate increases, about 9 percent will see their rates increase by 10 percent, the highest hike allowed under the new guidelines. The remaining 21 percent will see increases of less than 10 percent, the company said.

The United Services Automobile Association, or USAA, said its filing would reduce its rate throughout the state by 15 percent on average under the new system.

“We look forward to competing in a thriving, open market that benefits Massachusetts consumers,” said company representative John Friedman.

Monday’s filings are being closely watched on Beacon Hill, where some urban lawmakers are pushing a bill to significantly change the administration’s final set of rules.

State Sen. Dianne Wilkerson, D-Boston, and state Rep. Antonio Cabral, D-New Bedford, say those rules create loopholes, such as considering membership in a professional organization as a proxy for occupation, which insurers can use to set higher rates for low-income and poor people.

(Associated Press)