For Immediate Release - June 01, 2005

GOVERNOR ROMNEY FILES AUTO INSURANCE REFORM LEGISLATION

$150 Million Initial Savings for Good Drivers, Reigns-In Fraud & Non-Medical Costs

Governor Mitt Romney today filed legislation that cuts rates for good drivers and introduces more competition into the anemic Massachusetts auto insurance marketplace by providing consumers with the same choices as drivers in other states.

With a goal of ensuring that drivers pay premiums in relation to their own driving histories, cost savings from the Governor's proposals will fund a $150 million rate rollback for motorists with clean driving histories, which encompasses 64 percent of all drivers.

Average savings for the state's better drivers will amount to 5 percent, or between $52 to $119 on a statewide basis. Savings will be higher in the cities, where premiums are also higher. Savings for Boston drivers with clean records will range between $80 and $167. In Lawrence, the savings will range between $90 and $173.

Allston resident Matthew Snyder, in attendance this morning, currently pays $1,800 for a 2002 Nissan Pathfinder. "As a resident of Boston with a clean driving record, I support this new piece of legislation that Governor Romney is proposing today because it is time for progress and change here in Massachusetts," he said. "We need a system in place that allows for more competition, better rates for drivers, and more options for consumers across the Commonwealth."

The Governor's proposal targets fraud and excessive personal injury costs associated with over-treatment by raising the current tort threshold to $4,000 from

$2,000, capping non-medical treatments at ten visits and establishing a fee schedule for health care reimbursements, a measure that was key to controlling medical costs during the state's workers' compensation reform of the early nineties.

"With so few insurers doing business here, we can no longer pretend that our system is healthy and benefiting our citizens. This bill brings the flexibility to our system that exists everywhere else. It attacks fraud and excessive treatment costs, gives our good drivers some immediate rate relief and provides insurers with the flexibility to charge rates that reflect drivers' records," said Romney.

Representative Ron Mariano, Chairman of the House Committee on Insurance and Financial Services said, "The task force has worked long and hard over the past 13 months to develop an automobile reform package that we hope will attract national writers to Massachusetts and strengthen our overall insurance market."

The legislation will allow insurers rate flexibility for all coverages, but would cap any maximum rate increase for liability coverages at 15 percent annually. Governor Romney pointed to reform success in New Jersey as proof that good drivers will be rewarded with significant savings in the future. New Jersey policyholders have received $334 million in savings in just two years following passage of similar reforms.

"We expect our reforms here will yield similar results in the coming years," added Romney.

Massachusetts Consumer Affairs Director Beth Lindstrom and Insurance Commissioner Julie Bowler applauded the benefits and protections under the Governor's proposal.

"Our consumers have been short-changed on options and the ability to shop around on price for too long. A competitive market and a good driving record is the pathway to savings for the vast majority of our drivers," said Lindstrom.

"As in every other state, insurers' rates will not take effect without my staff's scrutiny. In a new, competitive landscape my agency will give consumers the information they need to understand their choices and protections including an Auto Insurance Consumer Bill of Rights and a re-vamped website to guide consumers thru the insurance options in their area," said Insurance Commissioner Julie Bowler.

"This concrete step toward auto insurance reform is greatly welcome and necessary," said Edmund F. Kelly, Chairman, President and Chief Executive Officer of Liberty Mutual Group, the state's fourth-largest and nation's eighth-largest auto insurer. "In no other state are consumers so limited by choice as in Massachusetts, and we laud the Governor's support of restoring healthy competition to the market."

Progressive Insurance, the nation's third largest auto insurance group, stopped doing business in Massachusetts years ago, but was hopeful of returning to Massachusetts if the legislation becomes law.

"We are encouraged to see reform underway in Massachusetts. Our hope is that a bill passes into law with language that creates a competitive, open, and flexible market that will allow Progressive to serve Massachusetts residents," said Adam M. Kornick, Massachusetts Product Manager, Progressive Insurance, based in Ohio.

"The insurance industry is critical to the economic foundation of our state," said Ranch C. Kimball, Massachusetts Secretary of Economic Development. "We need to attract new insurers to Massachusetts and make this industry more competitive."

The legislation builds on fraud enforcement measures that Governor Romney signed into law in January by creating an Insurance Loss Control Fund, which will equally disperse $700,000 annually to police in the seven cities with the highest frequency of injury claims. The added funding, which will come from assessments on insurers, will bolster coordinated anti-fraud efforts between the state's Insurance Fraud Bureau and law enforcement in these cities.

Safety considerations and injury prevention are also proposed in the legislation, which would require remedial driver training for those with five surcharges in three years and a 30-day license suspension following a Registry hearing for those who don't comply.

Tougher penalties for failure to use car seats for infants and toddlers and a new requirement for the use of car booster seats for small children are also included in the proposed legislation.