December 15, 2003
CONTACT: Chris Goetcheus
(617) 521-7333

Division of Insurance Announces Auto Insurance Rate Decision for 2004

Commissioner Bowler Rejects Auto Insurers' Request for 12.4%

(Boston, MA) Insurance Commissioner Julianne M. Bowler today rejected the auto insurance industry's request for a 12.4% average rate increase and signed a decision in the 2004 private passenger insurance rate case that will result in a 2.5% statewide average rate increase next year. The smaller increase shaves $101.29 off the insurers' requested $126.80 per vehicle increase. The new rate takes effective January 1st and results in an average increase of $25.51 per vehicle and a statewide average annual rate of $1047.04. *

Today's decision recognizes the State Rating Bureau's ("SRB") argument that 7% of the 12% requested by the auto insurers was built into their profit request; a figure the SRB argued was too high. Commissioner Bowler also pointed to the industry's efforts associated with containing claim costs.

"Insurers' use of procedures aimed at weeding-out unsubstantiated injury claims must be consistent. They must be vigilant in their efforts to uncover fraudulent claims. We will not pass along unnecessary costs to policyholders," Bowler said.

The Commissioner's decision found that the insurers' cost-containment filing was deficient and the use of cost-containment programs were inadequate. Data filed by the insurers showed that the use of independent medical examinations dropped by more than 3% for personal injury claims and almost 9% for bodily injury claims between 2001 and 2002 and the use of special investigation procedures among insurers was inconsistent. These factors come at a time when insurer witnesses testified that fraud is not abating and may even be on the rise in the state.

Referencing recent efforts to crack-down on fraud activity in Essex County, Commissioner Bowler directed the industry to identify by February 1st additional regions in the Commonwealth to be targeted for concerted anti-fraud efforts. "Similar cooperative initiatives between the industry and law enforcement need to be undertaken, because this problem is not confined to any one city," Bowler said.

Also announced in the decision was a 0.9% average increase in commissions for agents from $113.00 per vehicle in 2003 to $114.00 in 2004.

* It should be clarified for your audience that the average statewide rate does not necessarily reflect what any one policyholder will pay for premium in 2004. Actual premium is dependent on the types of coverages and deductibles chosen, number and types of vehicles insured, SDIP records and driver classifications, territorial assignment and any discounts applied.