MASS. AUTO RATES NEED REFORM:

Auto rates in Massachusetts are expected to average $1047 in 2004, up from $936 in 2001, and political leaders say they are willing to consider whether competition can hold down costs better than the state’s unique one-size-fits-all insurers system. Republican Gov. Mitt Romney, Democrat Attorney General Thomas Reilly and State Rep. Ronald Mariano, a Democrat who co-chairs the legislative joint committee on insurance, all agree that they would like to see some competition in pricing auto insurance in the Commonwealth. “Our auto insurance structure is a mess, characterized by policyholders subsidizing fraud and inefficiency,” Romney told the Boston Globe in a year-end interview. The National Association of Independent Insurers has added its voice to those calling for reform. Senior Counsel Gerald L. Zimmerman recently sent letters to the editorial page editor of the Wall Street Journal and The Republican, praising them for recent articles on the necessity for auto insurance reform in Massachusetts. He pointed out that only 19 insurance companies write private passenger auto policies in Massachusetts today, most of them homegrown. Big companies—Allstate, GEICO, State Farm—have spurned the market. Insurance Commissioner Julianne M. Bowler has been working on the issue for more than a year. She was instrumental in forming a working group that includes Reilly’s office, Mariano, independent agents, most insurance trade associations and 16 of the state’s 19 auto insurance writers. Their first priority is to make changes to Mass.’ high-risk pool. Critics contend that the current residual market, Commonwealth Auto Reinsurers (CAR), unfairly distributes the accounts and losses of high-risk drivers among insurers. On Nov. 15, the committee submitted a report to Bowler and Reilly that calls for an assigned risk plan similar to those in many other states to replace CAR. It would be introduced over three years to minimize market disruption and would open up the residual market to all agents and signal an end to the Exclusive Representative Producer model now employed by CAR. A final plan is expected in early 2004.