Insurer defends '08 auto rate plan

Commerce to argue filing fully complies with state guidelines

By Bruce Mohl
Globe Staff / December 14, 2007

Sounding a combative tone, the state's largest automobile insurer says it intends to vigorously defend its 2008 rate plan at a hearing before state regulators on Jan. 9.

Both the state Division of Insurance and Attorney General Martha Coakley have raised concerns about the rate filing of Commerce Insurance of Webster, but a top official at the firm said yesterday the company believes its filing is in full compliance with the regulations and guidelines issued for managed competition by Insurance Commissioner Nonnie S. Burnes.

"We are going to stand by our filing and vigorously defend it," said James Ermilio, senior vice president and legal counsel at Commerce, which insures approximately one-third of the state's cars.

While other automobile insurers have indicated they would change their filings in the wake of concerns raised last week by the Division of Insurance, Commerce's pledge to defend its rate plan indicates the transition to managed competition is unlikely to go smoothly.

After 30 years of letting state regulators create one set of auto insurance rates for all the carriers, the Patrick administration this year decided to move to managed competition, in which each company creates its own rates but they must be individually approved by state regulators.

Coakley earlier this week requested hearings before Burnes on the rate filings of Commerce, Premier Insurance of Worcester, and Safety Insurance of Boston, saying they were attempting to overcharge customers by over $100 million. She also said rates would be lower if state regulators continued to set them. Coakley has until next week to decide whether to request additional hearings on other companies' rate filings.

A spokeswoman for the Division of Insurance said the hearing requested by the attorney general on the Commerce rate filing would be held on Jan. 9, with a prehearing to set ground rules scheduled for Wednesday. The spokeswoman, Kimberly Haberlin, said the hearing would focus on whether elements of Commerce's rates were excessive and whether the company was using any discriminatory rating factors. Haberlin said concerns raised by the Division of Insurance about Commerce's filing would be addressed at the same hearing.

Four major concerns have been raised about the Commerce filing. The Division of Insurance last Friday said Commerce, Liberty Mutual Insurance of Boston, Electric Insurance of Beverly, and Arbella Mutual Insurance of Quincy had violated division guidelines by basing discounts on how much bodily injury coverage a customer had purchased. The division also said Commerce had incorrectly incorporated a discount it offers to members of the American Automobile Association into its rates rather than offering it separately as a group discount.

Coakley has raised broader concerns. She accused Commerce, Premier, and Safety of padding their profits and on Wednesday accused Commerce and Liberty of developing their rates in a way that could lead to unexpected higher rates for urban drivers.

Although the rate filings of other companies have been criticized by state regulators, Ermilio said Commerce feels as if it has been singled out. Ermilio said Commerce took a very conservative approach in crafting its rate plan while many of its competitors were far more aggressive in interpreting division guidelines. He said his chief concern was that all companies be treated equally.

He said managed competition so far seemed unlike the systems in place in other states. "We're treading in new waters," he said.

The rate plans filed by companies last month are for policies renewing after April 1. Ermilio said Commerce would like to start sending out policies to agents and customers by mid-February, which means any disputes about rates would have to be settled fairly quickly.

Bruce Mohl can be reached at mohl@globe.com.