1.3 million won't see drop until '08

If you are one of the 1.3 million Bay State residents whose car insurance renewal occurs between now and April 1, maybe it would be best not to think about the big rate reductions announced by the state at the end of 2006.

Why? Because you won't see a nickel of it until 2008.

Why not? Because the state pushed back the effective date of the rollback by three months to make it easier on your insurance company, which now has time to recalculate your bill rather than send you an estimated one.

That was necessary in the past, because rate decisions would be handed down in December for policies that renewed just weeks later.

"There was a great deal of confusion on the part of consumers who said, 'Gee, do I have to pay this bill since it's only an estimate?' Some wouldn't pay it and wouldn't call their agent and would get canceled," Frank Mancini, president of the Massachusetts Association of Insurance Agents, told The Standard-Times.

But if you try to game the system, your agent has been equipped with a dozen reasons by the MAIA why it isn't worth your trouble and that you should settle for the prospect of getting a three-month break someday when the rates go back up.

That's just fine with Shirley Smith of New Bedford, who said that the delay is fine "as long as I'm going to get it within a year. If I weren't going to get the rate decrease, I would be objecting."

She isn't a typical insurance customer, however; she's vice president of the Charles S. Ashley & Sons agency in New Bedford and knows a little more about it than most people. Almost a dozen others interviewed for this story had no idea when their automobile insurance renewed, either because their spouse handles it — or they just didn't know.

Several people reacted much the same as Derek Santos of New Bedford, who said it was "awesome" that his April renewal means a savings "of about $9 month." But he and others quickly shifted gears to complain about their homeowner's insurance being canceled for living too close to the water.

Jennifer Gonsalves was still too busy fuming at a doubling of her homeowner's premium because of the flooding threat — at the top of the Clasky Park hill in New Bedford.

Others, such as Sheri Easterbrook of Fall River and Rick Petersen of Whitman, bristled at the subject of car insurance in general. "I'm 64 and I've been driving for 44 years without a claim. If you figure $1,000 a year, that's $44,000 just sitting there," he said.

Ms. Easterbrook, who said she is 61 and has been driving since she was a teenager, complained that not only hasn't she never filed a claim, but that when she moved into Massachusetts from Rhode Island "my insurance went out of sight." A 12 percent rate cut hardly compensates for it, not when she was paying $130 a year for Rhode Island's minimum coverage and $1,200 here.

The current auto insurance story began when, in one of its last acts, the Romney administration issued new rates that trimmed an average of 11.7 percent — about $10 per month for the average driver.

But a rule change passed in 2004 takes effect this year, to give insurers time to recalculate your bill before sending it to you if you are one of those whose renewals occur in January, February or March (that's one-quarter of the calendar year, but affects one-third of policies because of the residual effects of the days when all policies renewed on Jan. 1).

So for the next three months, renewals will occur at the old, higher rates, and policyholders will miss out on the savings. (If there had been an increase this year, those same policyholders would have avoided the hike for the first three months.)

All of this has resulted in a flurry of phone calls to insurance agents, who last week got some help answering questions in the form of an e-mail from the MAIA.

It spells out all the ways that the rules and regulations regarding car insurance work against anyone who believes they can beat the system.

For one thing, for those who want to cancel their insurance and get a new policy on April 1, there's a penalty for quitting a policy before it runs out — 5.5 percent for those who would do that in January, and 5 percent in February, said Beth Sylvia Caldwell, vice president of the Sylvia Insurance Agency in Dartmouth.

There goes almost half your rate reduction in one step.

You will also lose any group discount you now enjoy, if you have one. You may also find yourself in a new territory with a new rate that isn't to your advantage, another wrinkle in the system that shows up on April 1.

If you cancel and start a new policy, you will have to pay another down payment of perhaps 30 percent — and any rebate from your old one will be weeks away.

"Not everybody has the 30 percent deposit to lay out twice like that," said Ms. Caldwell.

And finally, you will not be allowed to cancel and renew just to get a new, lower rate with the same insurer, because that isn't allowed. You may switch insurers, but that might also mean switching agents and maybe losing a discount for bundling your homeowner's and auto insurance with the same firm. If you switch insurers, you will have to have your car reinspected for the new one.

Mr. Mancini said it's just coincidence that the new rate schedule arrived at the same time as the biggest rate reduction in recent memory, calling everyone's attention to the circumstances. "If the rates had gone up, nobody would be talking about this," he said.

"One thing to remember is that this is not a one-year change. It is permanent," said Mr. Mancini. That would leave open the prospect of the three-month lag time before increases — as well as cutbacks — kicked in. "The best thing to do is stay put," he said.

But what of the idea that someday will never come, because Massachusetts will soon abandon its system of setting rates and join the other 49 states that offer open competition for auto insurance business, often with direct sales that "eliminate the middleman"?

"My guess would be that people in New England, in Massachusetts in particular, like to do business with an independent insurance agent," said Mr. Mancini.

In fact, the MAIA surprised Gov. Romney in 2005 by opposing his plan to introduce competitive rating, which would likely cut into their business. Mr. Mancini was open about this major reason: 75 to 80 percent of the auto policies in Massachusetts are written through agencies, the highest percentage in the nation.

He added that a competitive system would become much more complex and contain unpleasant surprises for many people.

"Our position has always been that someone's auto rates should be based on three things: first, where they live; second, their own personal driving record; and, third, how long they've been driving, how much experience they have," he said.

"Once you get beyond that, anything used to determine someone's driving record is subjective. And one of the big things being used is a person's credit history. ... We just don't think that has anything to do with your driving."

So, as long as the agents successfully defend the current system, motorists who miss out on the kickoff of the rate reductions may eventually come out ahead when the rates go back up, in future years.

If it's any consolation, the agents are missing out, too. As of April 1, according to the MAIA e-mail, their commissions go up from 11.8 percent to 13 percent. But for the next three months, they won't get the pay raise.

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By STEVE URBON, Standard-Times senior correspondent

Contact Steve Urbon at

surbon@s-t.com

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