More than a year into the Gov. Deval Patrick administration’s managed competition automobile insurance reform initiative, the state’s largest industry trade association is pointing to important positive indicators.

“By at least three indisputable metrics we can say that managed competition is working,” said James T. Harrington, Massachusetts Insurance Federation’s executive director. “The number of companies writing auto insurance in Massachusetts has increased by more than 50 percent, the state’s high-risk pool of drivers is at its lowest level in decades, and public opinion surveys indicate widespread consumer satisfaction with the new system. Furthermore, there is ample evidence that good drivers, no matter where they live or what they do, are paying less than they did.”

New Market Entrants

Prior to the state’s decision to bring competition to the auto insurance market, only 19 companies offered auto insurance in the commonwealth. Since that time, 11 underwriters have entered the domestic Massachusetts market, an increase of more than 50 percent. “What’s so important here is that the tide of auto insurance companies leaving the state has been reversed,” said Harrington. “This is critical for consumer choice but it is also good news in terms of jobs and economic impact as new companies devote new resources.” Companies joining the domestic market since the establishment of competition are: Progressive, GEICO, Allstate, Peerless, AIG Private Client Group, Harleysville, IDS/Ameriprise, Occidental Fire & Casualty, Praetorian, Preferred Mutual, and Vermont Mutual.

High-Risk Market

Data maintained by the Commonwealth Automobile Reinsurers at the end of 2008 reveals that the number of drivers in the state’s high-risk pool has shrunk to its lowest level in decades. CAR is the state’s quasi-public administrator of the high-risk pool. “Prior to competition, the state rating process made insuring many drivers, which often included good drivers, unattractive, causing Massachusetts to historically have one of the largest high-risk markets in the country,” Harrington said. “Now that companies are competing, the size of the high-risk market is at a virtual record low.” CAR data shows that only 3.5 percent of all drivers were considered high risk at the end of 2008 as compared to more than 10 percent in 1998 and more than 60 percent in 1988.

Consumer Satisfaction

The MIF commissioned a public opinion survey late last year that showed enormous consumer satisfaction with the move to competition. The survey by David Paleologos of DAPA Research, Inc. found consumers giving high ratings to competition in all demographic categories and all regions of the commonwealth. More than 71 percent of all drivers voiced support for the new managed competition system over the former system.

MIF intends to commission another survey later this year. “Competition is still young here in Massachusetts but consumers clearly feel that it is long overdue,” said Harrington. “People accept the premise of a system where fundamentally good drivers pay less and bad drivers pay more. What to pay and where to buy really do mean something now, and consumers support that those are choices they should be able to make.”

Source: The Massachusetts Insurance Federation

© Copyright 2007, National Association of Mutual Insurance Companies (NAMIC).