Letter From The Commissioner of Insurance
Commonwealth Of Massachusetts
October 5, 2007
I have today filed with the Secretary of State the final regulation governing managed competition in the private passenger automobile insurance market. Most of this regulation will look familiar to those of you who have reviewed the proposed regulation. I have, however, made one substantive change and a variety of technical changes after listening to the testimony offered at the hearing on the regulation and reviewing the filed testimony.
This regulation is the framework for a smooth transition from a market in which the Commissioner sets the rates to one in which the companies propose their own rates. This new market is designed to produce lower rates for good drivers wherever they live, to have those rates based on factors that are fair to the consumers, to maintain a small residual market, and to retain the low number of uninsured drivers in Massachusetts. In order to provide these benefits to the consumers of the Commonwealth, we need a healthy, robust and flexible auto insurance market in which insurers are encouraged to be innovative in the products and services that they offer. So despite the urging that I received to state the factors that insurers may consider in proposing their rates, rather than telling them what they cannot use, I have determined that such a structure would be too rigid to deliver to our consumers the opportunities that we seek.
In response to what I heard at the hearing and read in the filed testimony, I am banning the use of credit information from a consumer reporting agency in underwriting, as well as in rating. There are those who assert that the use of this information is unfair and discriminatory. On the other hand, there are those who view the use of credit information as a valid factor in predicting risk in this market and that the use of this information benefits careful, responsible people wherever they live. I will be reviewing whether this information should continue to be banned after the Transition Period or whether it should be allowed, subject to appropriate regulation.
The technical changes that I have made are designed to clarify any ambiguities that have been pointed out to the Division and to effect stability during the Transition Period. One of the most important techniques that I will be using to assure stability in the market is to continue the territorial subsidies that have been in place for 2007. Some of the technical changes are addressed to assuring that everyone knows how that will be accomplished.
I look forward to working with all the interested parties as we move forward. I will be working especially closely with consumer advocates and community groups who can help us monitor the impact of managed competition on urban drivers, to assure that good drivers in urban areas receive the intended benefits of these reforms. Indeed, the Division has already begun holding public meetings on various subjects so that we can hear everyone's thoughts about how we should implement managed competition. I will be issuing a series of Bulletins so that everyone will know what the rules are. Everyone should know, of course, that all the rules will apply fairly and evenly to everyone who participates in this market.
Nonnie S. Burnes
Commissioner of Insurance