Mass. Auto Competition Heats Up – Over Rules and Regulations

After a month of operating under a new managed competition system for auto insurance, Massachusetts is seeing competition heat up — at least over rules and regulations.

The state has approved a controversial rule to temporarily relieve new carriers from any residual market burden. Also Progressive Insurance has come under fire by agents for allegedly violating rating rules in its online sales.

New carriers will be exempt from high risk assignments from the Massachusetts Assigned Insurance Plan (MAIP) for their first two years under a rule approved by Insurance Commissioner Nonnie Burnes. The final rule was amended from one that had permitted a delay of up to three years. That had been criticized by some existing carriers as unfair to them.

Burnes said this policy aligns the state with 40 other residual markets that permit a two-year lag between entry into the market and assignment of residual market risks. She dismissed calls for eliminating the delay altogether.

Critics, including established carriers in the state Arbella Mutual, Plymouth Rock and Encompass, had argued the rule would give new carriers a “free ride” at their expense. The newcomers would be able to price their policies without factoring in the cost of high risk drivers, a cost that one estimate pegs at as much as $100 per policy, they argued.

In other news on rules, producers had complained about Rule30C, which requires a carrier that writes an MAIP risk voluntarily to pay the producer of record a commission until 2011. Producers argued the commission should be paid until the policyholder leaves the producer’s agency. But Burnes declined to change the rule.

Independent agents, meanwhile, charged that Progressive Insurance, which began selling auto insurance online in the state May 1, is skirting state regulations and misleading consumers with its Web site quoting program.

The Massachusetts Association of Insurance Agents (MAIA) said the insurer is asking for gender, marital status, credit and other data that the state has prohibited insurers from using.

Also, agents alleged, the giant insurer is offering only six-month policies while the state says twelve-month policies must be made available.

The Division of Insurance said it would review the Web site along with MAIA’s complaints. The state added, however, that it has ensured that Progressive is basing its rates on driving record and driving experience, not on any of the prohibited rating factors. DOI acknowledged that it had not reviewed the site prior to it going live in the state.

Progressive said MAIA’s criticisms are not true and suggested that the dispute is a competitive volley by independent agents against online sales. “It’s unfortunate that the Massachusetts Association of Insurance Agents didn’t contact us about their concerns before issuing an inaccurate news release,” said John Barbagallo, Agency Operations, Progressive.

Progressive plans to begin selling private passenger auto in the state through independent agents next year.

Meanwhile, in a sign there is some competition brewing beyond that over the regulations, Casco Indemnity, which writes auto insurance in the other New England states on behalf of several mutual fire insurers, said it is looking to re-enter the Bay State auto market it left back in 2004. William Swetland, president and chief executive officer of the Saco, Maine-based Casco, said the company hopes to re-enter the market around July 1.

Casco would write on behalf of Hingham Mutual Fire Insurance Co. and Danbury Insurance Co. (both part of the Massachusetts-based Hingham Group) and Phenix Mutual Fire Insurance Co., located in New Hampshire, which own Casco.