Article Last Updated: 11/21/2007 02:59:26 AM EST
Drivers gunning their engines for auto insurance savings might want to shift into park.
The rates proposed by the state's 19 auto insurance companies won't take effect until April — anyone renewing a plan between now and then will do so under the old system — and some drivers could see their premiums increase by up to 10 percent, leading critics of competitive rate setting to say that their fears are coming true.
The average statewide plan will decrease by 7.7 percent, but good drivers could see reductions of as much as 25 or even 35 percent, with some companies offering aggressive discounts to capture the lowest-risk customers. Drivers with bad records, on the other hand, could see premiums rise by up to 9.9 percent.
Massachusetts is allowing auto insurers to set their own rates for the first time since the 1970s, ending years of state-set premiums. Under the rules set by Gov. Deval L. Patrick's administration, there are some restrictions: No driver can see his or her premiums increase by more than 10 percent, and companies are forbidden to use a driver's credit score to assess risk.
State Insurance Commissioner Nonnie Burnes released four sample policies yesterday that showed the maximum possible discount for four customers — a single driver with a good record, a family of three with one speeding ticket and so forth. All could find plans offering double-digit discounts, some as high as 36 percent over their current bills.
Although Burnes pointed to those rates as proof that good drivers from all areas will benefit under competition, the samples she released included only perfect or near-perfect drivers; she did not release samples that showed increasing rates for bad drivers.
The plans showed a broad range of potential prices: The same driver could be offered a 6 percent increase from one company and a 25 percent decrease from another. Burnes said drivers will have to keep their eyes open to make sure they get the best deal.
"It will be worth people's while to look around for the good deals," Burnes said. "They should be motivated and shop around. There are additional provisions that at least some customers might find interesting."
Most insurance experts suggest that consumers wait until the smoke clears and then explore the new marketplace.
"I would advise clients to do nothing because (the new rates) won't start until April 2008, and those polices won't be issued until the middle or end of February," said Edward Burniske of Reynolds, Barnes & Hebb Inc. insurance company in Pittsfield. "Hopefully, your agent will price them out for you, because a lot of the companies are going to give discounts for customers with homeowners' policies or two cars on the same policy."
James T. Harrington, executive director of the Massachusetts Insurance Federation, said that 64 percent of state drivers have good enough records to qualify for cheaper rates. Because 80 percent of all drivers already use insurance brokers, he suggested that they continue to do so, but go to two or three to find the best deals.
But critics of competition renewed their charge yesterday that the state is creating a system of insurance haves and have nots. Companies will cherry-pick the least risky drivers in the safest areas.
Andrea F. Nuciforo Jr., former state senator from Pittsfield, was a leading opponent of competitive pricing when he oversaw the insurance industry as chairman of the Legislature's Financial Services Committee. Now the Middle Berkshire register of deeds, he remains a critic of ending state control.
"In effect, what has happened is that a playing field that was entirely level for drivers is less level today," he said, "and it is less favorable for some of the most vulnerable drivers."
Last year, under the state-controlled system, drivers received an 11.7 percent premium reduction, and many industry observers expected rates to decline another 10 percent if the state set prices again this year. Nuciforo said he was not impressed by the 7.7 percent average drop in pricing.
"There will be big savings for a few drivers, pretty good savings for other people that are not unlike what they would have had (if the state set the prices), and there are going to be some pretty dramatic spikes for others," he said.
And it will be harder for drivers to tell what they are buying, he added, as insurers can now introduce new products that may be confusing or simply incomprehensible to the lay person.
And the rates still could change. The companies have a chance to amend their prices next week; although many are expected to either keep their proposals the same or to lower them to compete with other providers, they also could increase them.
Eagle Boston Bureau reporter Hillary Chabot contributed to this story.
At a glance ...
- New rates were introduced Monday, as Massachusetts is allowing auto insurers to set their own rates for the first time since the 1970s, ending years of state-set premiums.
- The average statewide plan will decrease by 7.7 percent. Good drivers could see reductions of as much as 25 or even 35 percent, but bad drivers could see premiums increase up to 9.9 percent.
- Consumers are advised to shop around for the best deal; one company could increase the premium for a driver, while another company could offer a decrease of as much as 25 percent.
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