Car-insurance changes hurt city drivers, critics say

An announcement by the state's Commissioner of Insurance this week that she intends to change the way that auto insurance rates are set in Massachusetts has sparked concern among lawmakers and some in the industry who believe that urban drivers will be adversely affected by the change.

Proponents of the plan argue that the introduction of competition will mean lower rates for drivers across the commonwealth. Detractors believe that while rates might drop for suburban drivers, consumers in Mattapan, Roxbury, and Dorchester in particular will see a sharp increase in their insurance costs.

"The ability to actually shop rates and negotiate and compare will be something that is enjoyed only by suburban drivers," said state Sen. Dianne Wilkerson.

Under the plan announced Monday evening by Commissioner Nonnie Burnes, Massachusetts would move away from the current rate-setting system in which the state mandates the rates which insurance companies can charge drivers, and towards what Burnes called a "managed competition" system.

Consumers will be able to take advantage of new rates for policies renewing on or after April 1, 2008.

"In order to facilitate consumer choice and insurer flexibility to offer new and improved products, I have decided to end the so-called 'fixed and established' system in favor of a system that introduces managed competition," said Burnes in a letter.

Of particular concern to Wilkerson is a provision in the proposal that creates an assigned risk pool in which drivers who are deemed to be "at risk" would be assigned to an insurance company.

Urban drivers would be disproportionately represented in the assigned risk pool, according to Wilkerson.

"What's going to happen is urban drivers, not just based on driving record, but based on where we liveĀ…are considered to live in high risk territory even if they are not high risk drivers," said Wilkerson.

John Gallagher of Gallagher Insurance in Fields Corner concurred with Wilkerson's assessment.

"In many ways that defines a lot of people in the city, many people have faced economic hardships and they come to an area like Dorchester, and these are gateway kinds of places, if they're put into an assigned risk plan, that puts them at a very disadvantageous position," said Gallagher.

Burnes wrote that she will continue to have "strong but supple regulatory oversight" to ensure that good drivers receive fair rates regardless of where they live.

"I will view with extreme skepticism any rate proposal that is based on socio-economic considerations such as education, occupation, home ownership, or credit report or score," wrote Burnes.

Wilkerson is skeptical that the Insurance Commission will be responsive if inequities between rates and service for urban and suburban drivers emerge.

"I'm not sure there will be a desire to fix it if the only people who are harmed are urban drivers," she said.

Many large national insurance agencies, such as Geico and Progressive, choose not to do business in Massachusetts because of the regulations the state placed on rates. The Romney administration sought to entice these companies to write policies in Massachusetts through deregulation, but their attempt to do so was unsuccessful.

Gallagher believed the issue had lost momentum and was surprised by this week's announcement.

"It looked like everyone thought the whole thing was dead, and then it got resurrected and now I think a lot of people are shocked," said Gallagher.

Wilkerson believed that such changes would be a non-starter with the Patrick administration.

"It's so clear and simple that it astounds me that it has gotten this far with a Democratic administration," said Wilkerson. "We certainly never thought we'd be in a position to defend against this bad policy against a Democratic administration."

Massachusetts has the lowest rate of uninsured drivers in the nation, said Wilkerson. She expressed concern that if rates were to rise substantially, bad drivers might opt not to purchase insurance at all.

"I think it's wrong, I think it's going to be a decision that this administration is going to regret and I'm sure if they don't my constituents in Roxbury and Dorchester will regret it," said Wilkerson.