Most drivers to see rates drop

Insurers offering ‘substantial’ cuts
By Steve LeBlanc THE ASSOCIATED PRESS

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

Insurance Commissioner Nonnie S. Burnes said based on filings submitted by the state’s 19 insurers yesterday, 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 Patrick administration 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 yesterday were already doing business in the state under the old system.

The state’s largest insurer, Webster-based Commerce Insurance, said in a statement that more than two-thirds of its policyholders will pay less for automobile insurance, and some may be in line for decreases of as much as 30 percent when compared to 2007 rates. Commerce, which controls 31.5 percent of the market, said it would continue to offer discounts to members of AAA and provide discounts for customers who have had auto coverage with Commerce for three or more consecutive years. Multipolicy discounts will also be provided, the company said.

Rules bar insurers from considering income, marital status, education, occupation, home ownership 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, for example 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 of the 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 their 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 a bit of an urban myth,” she said.

Mr. D’Amato said if the system had not been changed, overall rates in 2008 would have dropped between 10 percent and 15 percent and all drivers would have received a rate decrease. 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.

Worcester-based Travelers of Massachusetts, the state’s No. 6 insurer, said 75 percent of its 300,000 policies will be in line for a rate decrease. More than 33 percent of its customers will see savings greater than 10 percent, with some saving 20 percent or more.

Susan K. Scott, senior vice president and general counsel for Travelers, said about 25 percent of its drivers will see rate increases. On average, however, customers can expect savings of 6 percent, the company said.

Travelers will offer some new discounts that lower a person’s projected rate increase, including multiple policy discounts, hybrid car discounts or being a high school or college student with good grades.

“For the first time in a very long time, we have a significant appetite for growing our book of business,” said Ms. Scott.

Travelers insures about 7 percent of the state’s 4 million drivers.

Amica Mutual Insurance Co., the eighth-largest automobile insurer, said it would cut rates an average of 7.9 percent under the new guidelines. Amica, with 3.6 percent of the market, said 80 percent of its 100,000 policies will realize a rate decrease. The remainder will be in line for a rate increase, but it should not be substantial and will be well less than the maximum 10 percent permitted by Ms. Burnes.

USAA, which provides insurance products to active-duty U.S. military members and their families, said 95 percent of its 60,000 policies will be in line for a rate decrease, with the average rate decrease being 15 percent. No one will have a rate hike, said USAA spokesman David Snowden. USAA has 2.1 percent of the state’s market.

Yesterday’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. Sen. Dianne Wilkerson, D-Boston, and Rep. Antonio F.D. 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.

Telegram & Gazette business reporter Bob Kievra contributed to this story.