New state auto insurance system gets mixed review

LYNN – For more than 30 years, auto insurance companies doing business in Massachusetts have been told by the state Division of Insurance what rates to charge, when to penalize bad drivers and for how long.That restrictive system, the only one of its kind in the U.S., is expected to change dramatically on April 1, when a new “managed competition” sanctioned by the Legislature goes into effect.Industry experts have given the much-anticipated alternative mixed reviews although most agree that the present system leaves consumers with little incentive to shop around.Under the new system, insurance companies will set their own rates, subject to Division of Insurance oversight. Changes could also spell relief for drivers who have surcharges on their insurance policies for moving violations. In Massachusetts, surcharges remain active for six years. The new system lets the insurance companies decide how long.In yet another change, drivers who live in presumably more affluent communities where crime is minimal would pay lower rates.When the overhaul was first proposed by Gov. Deval Patrick, critics on Beacon Hill expressed concern that bad drivers would be rewarded while those with exemplary driving records faced rate increase because of age, marital status or where they park. Among them was Sen. Dianne Wilkerson, a Boston Democrat and member of a special panel formed to oversee the change, who called it “the worst economic policy.”State insurance officials argued that managed competition should translate to a 7.8 percent rate reduction for most policyholders and attract new auto insurance companies to Massachusetts, the latter serving to further increase competition and lower rates.Progressive Insurance of Ohio, the third-largest domestic auto insurer, has already announced plans to sell policies in Massachusetts, starting in May. The company said its premiums are on average about 18 percent lower than those currently offered by companies doing business in the state – for the same amount of coverage.The Massachusetts Public Interest Research Group (MASSPIRG), a consumer advocacy organization, released a report this week slamming managed competition. The report indicated some drivers with good records could see rate increases, while others with multiple driving violations could possibly enjoy lower premiums.David E. Zeller, owner of the David E. Zeller Insurance Agency in Lynn, said it’s not all about rates. “The informed and most properly insured drivers are the ones who shop for benefits and coverage, not for premiums and rates,” he said. “Before April 1, every policy was about the same price and all the coverage was almost the same. As of April 1, prices are going to be all over the place. But more importantly, coverage is going to be completely different between every single company. So you have to shop for the agent that has a company that provides the kinds of benefits you need.”According to Zeller, an agent’s responsibility is to find the most suitable coverage for each client. “I don’t care where you live. I’m concerned about what you need for protection,” he said, explaining that some insurance companies have already filed their own SDIP rates, which are the violation surcharges.”If you have an accident, you get a surcharge. That’s how it was. But now, a company can either follow that old guideline or create its own. The state looks back six years on your driving record when it comes to surcharges, but a company can decide to look back only three or even none.”Zeller said the new system also allows drivers to switch insurance companies in an effort to eliminate outstanding surcharges. “You switch companies, the surcharges get wiped out,” he said.As the deadline approaches, insurance companies are devising ways to keep customers or attract new ones. Progressive and Geico have been advertising low rates. Others, like Commerce Insurance Co., are giving special credits.”We represent Commerce, and they’re offering a loyalty credit,