Report: Deregulation Made Massachusetts Auto Insurance Market Worse

The deregulation of the Massachusetts auto insurance market has driven up prices, boosted insurer profits, reduced consumer protections and generally created confusion in the marketplace, according to a new report by the state’s attorney general.

The report comes roughly two years after the launch of managed competition, provides an accounting of how the market is operating and includes a number of recommendations to improve consumers’ interests.

“While the long-term results of this new system remain to be seen, our office is concerned that consumers may not, in fact, be getting the best rates and the protections they deserve,” said Attorney General Martha Coakley in a statement.

The report says most consumers haven’t shopped around for insurance – and therefore are not driving rates down. Coakley’s office also said it is particularly concerned companies are now rating customers on several new factors more closely linked to socio-economic status, rather than to consumers’ driving records.

The report also contends many consumers whose rates decreased still paid more than they would have under a regulated market.

Had the regulatory rate-setting process occurred in 2008, rates would have been reduced for essentially all consumers, with average rate reductions much greater than those seen under deregulation.

The report also says the system is complicated for consumers to understand.

Coakley’s office recommends several moves to help improve the auto insurance market for consumers. Among them: improved rate proposals, creation of a state-run Web site to provide side-by-side quotes for all insurers, elimination of penalties for leaving an insurance company early, prohibition of the collection of personal information not needed for rating and the introduction of legislation to ban the use of credit score in insurance ratemaking.