Insurance Commissioner Issues Final Managed Competition Regulation
Guidelines ban credit information in both rating and underwriting, enhance consumer protections
"The question we asked ourselves throughout this process is how to provide consumers with as much choice, as many benefits and as much protection as possible," said Burnes. "I believe this final regulation provides the long overdue answer that good drivers across Massachusetts have been looking for."
In a significant change, the final regulation bans the use of credit information for both rating and underwriting. The Commissioner made this change in response to concerns expressed to the Division throughout the public hearing process. The ban extends throughout the transition period to allow ample time to study more closely what impact the use of credit information may have on consumers across multiple lines of insurance. Additionally, by barring insurers from using credit information, gender, marital status, education, occupation, homeownership and other socioeconomic factors in rating and underwriting, the final managed competition regulation encourages insurers to give the most weight to driving record and experience - two equitable assessment factors for all drivers.
"I have said all along that we would be listening hard to public input and we have responded appropriately to the concerns people raised about using credit history in rating and underwriting," said Burnes. "We need to better understand how credit information in rating and underwriting affects all lines of insurance and determine whether or not its regulated use is in consumers' best interests. Prohibiting it in the auto market will give us the time we need to assess its impact across the board and come up with the right solution for Massachusetts consumers."
The final regulation requires companies issuing policies between April 1, 2008 and April 30, 2008 to file their rate proposals with the Division by November 19, 2007. Companies issuing policies on or after May 1, 2008, can submit their rates to the Division any time after February 15, 2008. Consumers will be able to start shopping for automobile insurance in the same way they shop for other goods and services in late Winter.
The Division has already begun holding twice weekly open meetings with consumers, producers and the industry on various subjects related to the implementation of managed competition. In the coming days, weeks and months, the Division will be issuing a series of bulletins that will further govern the transition to managed competition. "I look forward to working with all interested parties to ensure that Massachusetts drivers receive the benefits they deserve under our new system," said Burnes.
Additionally, the final regulation preserves a number of existing subsidies to protect urban drivers, assists consumers to comparison shop among companies for the lowest premiums and establishes procedures for the Commissioner to disapprove excessive or unfairly discriminatory rates, as well as to suspend rates already in effect, if necessary. Specifically, the regulation:
- Prohibits rating on the basis of sex, marital status, race, creed, national origin, religion, occupation, income, education, homeownership, credit information or age, except to produce the reduction in rates for drivers age 65 years or older as required by law.
- Prohibits underwriting on the basis of sex, marital status, race, creed, national origin, religion, age, occupation, income, principal place of garaging of the vehicle, education, homeownership and credit information.
- Prohibits insurers from using drivers' accidents or violations that are more than six years old to raise premiums.
- Preserves the 2007 subsidies across territories to protect urban drivers for policies with effective dates in the transition year.
- Preserves other provisions that benefit urban drivers, such as the low mileage discount for annual mileage under 5,000.
- Requires companies to file forms that describe the overall percentage change from the 2007 premium on certain policy profiles to facilitate competitive shopping by consumers.
- Mandates consumer disclosures regarding coverage options and requires insurance companies to provide coverage and price information on their websites or by telephone.
- Establishes procedures for the Commissioner to disapprove rates that are excessive, inadequate or unfairly discriminatory.
- Establishes procedures for the Commissioner to suspend rates that are in effect, if necessary.
The regulation requires the following filing dates:
- AIB Transitional Advisory Filing due by October 22, 2007
- Residual Market Transition Rate Filing due by October 24, 2007
- All Voluntary Market Transition Rate Filings for companies that will be issuing policies between April 1, 2008 and April 30, 2008 due by November 19, 2007
- Any company that will be issuing policies on or after May 1, 2008 may make a Voluntary Market Transition Rate Filing any time after February 15, 2008