Lame duck Romney team pushes ahead with high risk plan change

Massachusetts Insurance Commissioner Julianne Bowler said she intends to finish what she started three years ago in trying to refashion the state’s high risk auto insurance system, despite urgings by some that she leave the task for the administration of newly-elected Gov. Deval Patrick, who will replace her boss, Mitt Romney, on Jan. 4, 2007.

Bowler, who could soon be out of her job due to the election of Democrat Patrick, told Insurance Journal that the Romney administration’s plan to replace the current reinsurance system with an assigned risk plan “would have been implemented by now if not for the appeal which was resoundingly rejected by the SJC (Supreme Judicial Court).” She was referring to a failed court challenge to her authority to implement the new plan.

The outgoing chair of the Financial Services Committee, Sen. Andrea Nuciforo, among other opponents of the ARP, has urged Bowler to leave the decision of what to do to the incoming Patrick administration.

But Bowler took the next step toward implementation of the ARP, known as the Massachusetts Assigned Insurance Plan, when she convened a Nov. 10 public hearing to hear comments on the latest draft of the MAIP rules. A number of insurers, insurance agents, consumer advocates and elected officials testified.

Among those testifying was Daniel Foley Jr., director of government affairs for the Massachusetts Association of Insurance Agents, who urged that some rules that affect agents be clarified. He also asked Bowler to make sure the implementation schedule, which now calls for the MAIP to be open for new business on April 1, 2007, is realistic.

According to Frank Mancini, executive director for MAIA, agents also want to be assured that the electronic system through which agents would access the MAIP is tested in time for MAIP’s launching.

Incoming Gov. Patrick has not indicated whether he supports the MAIP but industry observers said that regardless of his position they would not expect him to intervene before he actually takes office.

Bowler has argued that the MAIP is needed to bring the state’s auto insurance system more in line with those of other states in part as a way to attract new insurers to a market she thinks needs more capital and competition.

Insurers backing
The Property Casualty Insurers Association of America agrees with Bowler. “The creation of the MAIP will be a significant and very positive development for the Massachusetts private passenger auto insurance market,” according to Frank O’Brien, vice president and regional manager for PCI.

O’Brien maintains that Bowler “has an obligation to finalize the establishment of the MAIP in accordance with the schedule in the proposed rules.”

The American Insurance Association is also backing Bowler. “The current residual market system has become a roadblock to writing auto insurance in the Commonwealth,” said John Murphy, AIA vice president, Northeast Region. “The current system is unfair and benefits some insurers over others.”

Murphy points out that the attorney general concluded months ago that the current system does not meet the statutory mandate for a fair and equitable sharing of residual market losses.

Murphy said that adopting the MAIP “will also send an important positive signal that Massachusetts is serious about normalizing its auto insurance system.”

But opponents, who include some of the biggest domestic auto insurers and elected officials, have told Bowler that what she wants to do is a substantial change that is unnecessary. They argue that the switch to MAIP is unnecessary because past problems with certain insurers manipulating the system have been resolved, the industry has made inroads in combating fraud and drivers’ rates have been going down for several years.

Under the proposed plan, new business could be written in the MAIP as of April 1, 2007 and renewal business as of July 1, 2007. This would apply to all agents.

Meanwhile, personnel at Commonwealth Auto Reinsurers, which runs the state’s high risk system, have been working to meet Bowler’s implementation schedule. CAR President Ralph Iannaco has created several MAIP project teams to develop procedures and systems. CAR has added a “MAIP Information Section” to its Web site (www.commauto.com).

According to CAR’s MAIP update, the front-end producer system being developed will allow producers to access the MAIP by upload from an agency management system or directly on CAR’s Web site.