December 15, 2005
CONTACT: Chris Goetcheus (617) 973-8767
|An Early Christmas Gift For Motorists:|
An 8.7% Auto Insurance Rate Cut For 2006
Insurance Commissioner Bowler orders largest rate reduction in over 25 years
Massachusetts Insurance Commissioner Julianne M. Bowler and Consumer Affairs Director Beth Lindstrom joined Governor Romney today to announce the decision in the 2006 private passenger insurance rate case that results in a statewide average rate decrease of -8.7% next year 1. The new rate takes effect January 1st and translates to an average decrease of $95.14 per vehicle and a statewide average annual rate of $994.86 2. The rate cut saves Massachusetts drivers $380.3 million dollars and is the largest rate decrease in over 25 years.
"This is a well-deserved present for the drivers in the Commonwealth. It's an appropriate and substantial level of rate relief. However, we cannot lose sight of the fact that a rate decrease is no long-term answer to the problems that plague this system. To give the majority of our drivers real choices and the true rate relief they deserve, we need to move to a more competitive market of the type that exists in every other state in the nation," said Governor Romney.
"This decision directly reflects the drop in personal injury and property losses between 2003 and 2004 and fraud-fighting efforts in Lawrence contributed significantly to that reduction. I am pleased to be able to order substantial rate relief for our drivers at this time and hope that this trend continues," said Commissioner of Insurance Julianne M. Bowler.
Consumer Affairs Director Beth Lindstrom congratulated Commissioner Bowler and her staff for this year's result. "It's the evidence that determines the outcome and the commissioner has the added responsibility of ensuring rate adequacy for the insurers that still offer coverage here. Consumers can be assured that Commissioner Bowler made the right call on their behalf," said Director Lindstrom.
Property and personal injury losses fell by more than $237 million between 2003 and 2004. The Division of Insurance estimates that aggressive fraud fighting efforts by the City of Lawrence and the insurers yielded approximately $20 million in reduced losses.
Commissioner Bowler's decision also adopts a recommendation by the Division's State Rating Bureau to adjust rates for cities and towns that show significant reduction in claims on a timelier basis. As a result, the average rate reduction for drivers in Lawrence will be 2% greater that the statewide average rate reduction.
OTHER DECISION HIGHLIGHTS
Commissioner Bowler approved a -0.8% profit allowance for the insurers, which is slightly less than was allowed for profits in 2005. The insurers were seeking a +3.8% profit allowance, but the decision's profit provision provides a reasonable balance between the risks assumed by auto insurers and returns available in current financial markets.
A 1.5% average increase in agent commissions was approved, raising the average commission per vehicle from $119.50 in 2005 to $121.34 for 2006.
As a result of enactment of Chapter 213 of the Acts of 2004, the rate approved by the commissioner today will remain in effect through March 31, 2007. Should a private passenger auto insurance rate case be held in 2006, the new rate the commissioner would approve would take effect April 1, 2007. The new law allows insurers to eventually bill all policyholders using the new rate approved by the commissioner and reduces insurer expenses associated with provisional billing.
1 The statewide average rate increase or decrease authorized by the Commissioner is based on the existing rate at the time insurers make their rate request, typically in August of each year ($1,090 as of 8/11/05).
2 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 2006. 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.