Legislative Director, MASSPIRG
Legislative Director, MASSPIRG
Boston – Testifying before the Attorney General at a Boston hearing, MASSPIRG’s Legislative Director Deirdre Cummings called the proposed auto insurance consumer protection reforms “long overdue”.
“The reforms are much needed consumer protections to Massachusetts drivers in the new deregulated auto insurance system,” stated Cummings. “In short, the proposed regulations require the insurers to focus more on how we drive – instead of on who we are – in determining our premiums. The regulations lift the new veil of secrecy that prevents consumers from identifying unfair pricing and underwriting practices by insurers, and will promote competition by reining in deceptive marketing claims and by making it easier for consumers to compare prices and products and to switch companies.”
While the new deregulated, or “managed competition” auto insurance market has been a boon to the insurers, consumers have paid a high price. Average premiums are higher than they would have been under the “fixed and established” process where the Division of Insurance, after a review of the industry’s filing, would establish a rate ceiling. This process ensured that consumers would not be overcharged, yet had still allowed the insurers to compete by offering lower prices. The 2008 average premium under the new “managed competition” system had declined by 7% instead of the more likely decrease of at least 11% under the fixed and established rate. That 4% shortfall amounts to a transfer of about $150 million from consumers to insurers.
“The recent experience with the near collapse in our financial markets, the scandals in the student loan market and the tragedy happening today in the Gulf Coast have shown us that we need more not less consumer protection, oversight and transparency. These regulations do just that,” said Cummings.
Given that automobile insurance is a legally mandated requirement for all drivers, without which consumers place their financial security and livelihood at risk, we must ensure the rates and insurance company practices are reasonable and fair. While rates have recently been on the decline, the trend is reversing and premiums are starting to climb. We should not delay in adopting these critical reforms.
The new regulations:
1. Prohibit insurers from using unfair or already prohibited rating and underwriting factors
2. Promote transparency
3. Prevent misleading marketing practices
4. Make the competitive market work better for consumers
MASSPIRG also suggested enhancing the regulations by including access to an online system for consumers to easily solicit and compare quotes. “We ought to be able to go online, fill out a uniform application and then have each insurer send us a price quote, said Cummings. “Coupled with the important reforms in these regulations, including improved disclosure of all fees especially cancellation fees; restrictions on misleading marketing practices; transparency in rating and underwriting factors, and market oversight; a consumer web site would level the playing field and provide for a fairer and more competitive marketplace.”