Why Does Competition In Auto Insurance Matter?
Competition matters because you may be able to get different insurance products or packages for different (lower) prices if you shop around. Rates and policies are not the same across different insurance companies.
Who Sets Auto Insurance Rates?
Prior to April 2008, rates for automobile insurance were set by the Commissioner of Insurance under what was known as the "fix-and-establish" system. Under this system, if you requested a premium quote for the same coverage from different companies, each of those companies would give you the same price for that coverage - unless you were eligible for a group discount.
Since then, Massachusetts has had a competitive marketplace where automobile insurance companies use their own rates—approved first by the Division of Insurance—and offer different premium quotes based on their rating systems.
How Do Companies Determine My Premium?
Insurance companies group you with other individuals who share your general risk characteristics - such as the number of years driving experience. To calculate your individual premium, the company uses a base rate for your group (this is the rate approved by the Division of Insurance) and then adjusts it to reflect your individual risk factors and appropriate discounts for which you are eligible. In determining your actual premium, insurance companies may consider factors such as your years of driving experience, the number and type of your accidents and traffic violations, the vehicle you drive, and the place where you garage that vehicle.
Companies are prohibited from using your sex, marital status, race, education, and credit information for either underwriting or rating. A full list of prohibited factors can be found here: Basics of Auto Insurance.
Does Having a Competitive Market Lower My Premium?
Competition is designed to encourage insurance companies to offer their lowest possible premium to each driver. The minimum compulsory coverages for a basic policy are mandated by Massachusetts law. The types of additional coverage you may purchase voluntarily, known as optional insurance, may vary from company to company. Insurers may offer additional coverages, higher limits, and lower or waived deductibles, which means more choices are available to you. When selecting your coverage, you should consider the different rates, benefits, and services offered by the companies as they compete for your business. While every policy is different, the amount that you pay depends on your individual risk factors and maintaining a clean, accident-free driving record is the best way to lower your premium.
How Do I Shop Around?
Shopping around simply means you, or your agent, if you have one, request premium quotes from several different companies. We have a list of companies licensed to write private passenger auto insurance here: Companies Writing Private Passenger Automobile Insurance in Massachusetts | Mass.gov. To make sure you get the best possible comparisons from one company to another, you should make sure that each of the premium quotes you receive are for the identical coverage and limits you wish to purchase. Many consumers don’t realize that you can change your auto insurance carrier whenever you want. You don’t need to wait until it’s time to renew the policy. If you would like to know whether you could be saving money if you switched to a different carrier, you should shop around. Just remember that any change to your policy will affect your premium. Changing your vehicle, adding or changing drivers, changing your cars garaging location, and any change in driving history such as an at-fault accident or traffic violation may all increase your premium.