Letter From The Commissioner of Insurance
Commonwealth Of Massachusetts

August 28, 2007

Today, to begin the implementation of managed competition in the Massachusetts private passenger automobile insurance market, I am issuing a proposed regulation that will serve as the basic framework under which the new system will operate. The regulation establishes guidelines for rating and underwriting methodologies that are designed to benefit and protect all drivers, including those drivers who obtain insurance through the assigned risk plan. This regulation also establishes procedures for the first year of transition from state set private passenger motor vehicle insurance rates to rates that are competitively determined. The first year of transition begins with policies effective on April 1, 2008.

Four principles have guided the development of the proposed regulation:

  1. A reduction in rates for drivers with good driving records no matter where such drivers garage their vehicles;
  2. A low number of uninsured drivers;
  3. Stability within and maintenance of a small residual market
  4. Fairness to all drivers through the prohibition of the use of socio-economic factors

Information from the industry reveals continued declining claim costs. Additionally, insurance companies continue to enjoy good financial health. Both of these factors indicate that we can expect that drivers with good driving records should benefit from managed competition, regardless of where they live. These drivers should enjoy lower premiums and have the opportunity to choose from diverse offerings of premiums, products and services from the industry. The regulation emphasizes key rating factors such as driving record and years of driving experience. It also preserves the 2007 rate subsidies across territory. I will also continue to manage the market for that small group of drivers - approximately 4% of our drivers - who get their insurance in that part of the market in which insurers do not willingly offer policies. This continuity will help ensure a smooth transition for consumers and agencies to the new system.

This proposed regulation bans the use, in rating, of sex, marital status, race, creed, national origin, religion, occupation, income, education, homeownership, and age (except to effect the discount for insureds age 65 or older as required by law) as against public policy. Insurers may not use age (except for the over 65 discount), sex, race, occupation, marital status or principal place of garaging in underwriting; nor should they use education or home ownership in underwriting.

During the one-year transition period, insurers may not use information from credit reports for rating policies with effective dates during that period. The use of credit information for rating and underwriting affects multiple lines of insurance, not merely automobile insurance. For that reason, it is my intention to address the appropriate use of this information during the transition year and I may issue additional regulations on this subject.

When I issued my decisions on July 16th, I stated then, and restate today, that I, as Commissioner of Insurance, retain broad statutory authority and regulatory powers. I will not hesitate to disapprove rates that are excessive, inadequate or unfairly discriminatory or violate public policy. I will not hesitate to take appropriate action in the event that any insurer or producer fails to adhere to this proposed regulation and all of its consumer protections.

This regulation is only one step in the transition to managed competition. In the days, weeks and months ahead, the Division of Insurance will be issuing a series of bulletins to advise consumers, producers and companies on specific issues. In addition to these bulletins, the Division will hold regular public meetings to discuss the many issues associated with our move to managed competition to ensure a smooth and seamless transition. These meetings will be open to the public and I encourage participation from consumers, producers and the industry.

This proposed regulation will be the subject of a public hearing on Thursday, September 20, 2007 at 10:00 am at the Division of Insurance, One South Station, Hearing Room A (5th Floor), Boston, Massachusetts. All interested parties are encouraged to review this regulation and attend the public hearing or submit their suggestions and comments to me through the Docket Clerk at the Division of Insurance (c/o Docket Clerk, Division of Insurance, One South Station, Boston, MA 02110-2208).

I look forward to our continued work together to bring meaningful reform to our private passenger insurance market. Our success will bring lower premiums for good drivers, better service to consumers, and greater flexibility for insurers to introduce new and improved products.


Nonnie S. Burnes
Commissioner of Insurance

Hearing Scheduled for September 20, 2007
Proposed Regulation 211 CMR 79.00 pdf format of 211_79_Proposed.pdf