November 23, 2004
CONTACT: Chris Goetcheus
(617) 973-8767

Insurance Commissioner Bowler Approves Residual Market Auto Insurance Reform
"Clean in Three", Group Discount Retention, Other Provisions Added to CAR Rules

Massachusetts Insurance Commissioner Julianne M. Bowler today issued an order approving new rules for the equitable distribution of high-risk drivers among insurers in the state's residual auto insurance market, marking the most significant reform in private passenger auto insurance in more than a decade.

Following two public hearings and thorough review of Commonwealth Automobile Reinsurers' ("CAR") proposals, Commissioner Bowler is notifying CAR that its proposed rule changes, as modified by the Commissioner, are approved and that the Massachusetts Assigned Insurance Plan ("MAIP") will be implemented as an assigned risk system as of January 1, 2008, following a three-year transition period.

In considering CAR's proposals, Commissioner Bowler noted, "I have added modifications that are necessary to balance the need for consumer protections with the need to eliminate the inequity in the existing market. These changes will eliminate the gaming in the residual market system and motivate insurers to dedicate capital to reduce fraud, lower losses and increase voluntary insurance coverage in all areas of the state."

Commissioner Bowler added, "Nothing in this ruling increases the rate policyholders will pay or changes coverage options available to them. It reintroduces healthy market dynamics in order to attract new insurers to our state and ultimately provide agents and their customers a wider array of choices."

Residual Market Changes & Benefits

  • Eliminates "subscription" requirements as basis for involuntary agencies assignment to insurers, ending the practice of insurers terminating voluntary agencies or acquiring other insurers' agencies to maintain or improve competitive position.
  • Increases the market share requirement to 2% for insurers to directly service business placed in the high-risk pool or the MAIP, making the system more attractive to insurers not currently offering coverage in Massachusetts.
  • Phases-out the high-risk pool deficit by requiring all insurers to be fully financially responsible for the losses of policyholders they are assigned through the MAIP.
  • Creates incentives for insurers to increase voluntary coverage of policyholders in all areas of the state through the creation of a subsidy clearinghouse, which will allow insurers to collect the correct premium for each insured vehicle in the MAIP without affecting the premium charged to a policyholder.
  • Establishes uniform claim handling practices and performance standards based on nationally accepted standards.

Consumer Protections

  • New "Clean in Three" provision prevents insurers from assigning any policyholder to the MAIP if they are experienced drivers (licensed 3+ years) who have not had at-fault accidents or moving violations within their most recent three years of driving experience and who have had no convictions for drunk driving or vehicular felonies within 5 years.
  • During the transition period between January 2006 and January 2007, only policyholders who are relocating to Massachusetts without proof of previous driving history or who have obtained a license for the first time are eligible for assignment in the MAIP. During 2005, ceding of policyholders to the current high-risk pool will continue as currently done.
  • Policyholders who are members of group marketing plans retain their discounts and cannot be assigned to the MAIP.
  • With full implementation of the MAIP, newly licensed drivers added to an existing policy within a household must continue to be covered voluntarily with the current insurer.
  • Insurers will be required to send written notice to policyholders detailing the reason(s) for denial of voluntary coverage and must establish an appeal procedure for policyholders to contest assignment to the MAIP.

The full order issued by Commissioner Bowler will shortly be available online at under "News & Updates" on the Division of Insurance homepage.