Industry groups jockey for stake in $4b market as lawmakers remain split on need for change

Auto insurance isn't a front-burner issue right now for most consumers, but two warring industry groups are doing their best to whip up a public frenzy.

The two groups, operating with innocuous-sounding names that give no hint of the companies bankrolling them, are spending hundreds of thousands of dollars on TV and radio ads that twist the facts to their own advantage.

The ads, which will only intensify if a bill ever emerges from the Legislature's Financial Services Committee, appear to be aimed more at state lawmakers than the driving public. Lawmakers, even within that committee, are split on the need for change, while drivers, with auto insurance rates falling and expected to keep falling next year, are not clamoring for it either.

''This is not being driven by clients screaming about their rates," said Henry Risman, president of Risman Insurance Agency in Medford and Byette Insurance Agency in Tewksbury. ''There's no demand for reform."

The fight over auto insurance is being waged by two powerful industry groups seeking a competitive advantage in a market worth $4 billion.

In one corner is the Fairness for Good Drivers Coalition, which represents local and national insurance carriers that want to open up the state's market and let companies, not the state, set insurance rates. The coalition, which includes Liberty Mutual of Boston, Amica Mutual of Lincoln, R.I., and insurance groups with ties to bigger national players like Progressive Insurance and Allstate, says competition will yield better service and lower premiums.

The mantra of this group is that good drivers in Massachusetts pay more so bad drivers can pay less. It's a catchy but somewhat misleading slogan. Bad drivers, meaning those who cause accidents, are penalized financially under the state's auto insurance system. Subsidies come into play when good insurance risks -- those who live in the suburbs and have been driving longer than six years -- are charged slightly higher premiums so higher-risk drivers -- those in urban areas and those with less than six years on the road -- can be charged less.

The goal of the Massachusetts subsidy system is to keep insurance affordable so every driver will get it. The system works. Massachusetts has one of the lowest levels of uninsured drivers in the nation. Even members of the Fairness Coalition support retaining some subsidies to avoid rate shock during a move to competitive rate setting.

Commerce Insurance of Webster and Arbella Mutual Insurance of Quincy, two of the largest auto insurers in Massachusetts, want to keep the existing state-run auto insurance system in place. Calling themselves the Massachusetts Coalition for Affordable Auto Insurance for All, the companies are running ads suggesting that New Jersey's move toward broader competition in 2003 didn't work.

The sweeping claims about New Jersey aren't supported by the evidence, but a secondary theme in the ads -- that some drivers don't benefit from competition -- is raised effectively. Quoting a handful of New Jersey drivers with clean records who saw their premiums rise after the 2003 changes, the ads point out that insurance companies in New Jersey set premiums using risk-assessment tools not allowed in Massachusetts.

''With this so-called reform, you pay more for auto insurance if you live in a city, park on the street, maintain a credit card balance, work a blue-collar job, or have other circumstances that have nothing to do with your driving record," it says.

Coalition officials have affidavits and reviewed copies of insurance policies from the drivers featured in the ads, who were paid $2,500 as compensation for roughly two days of filming. (The Fairness Coalition says it didn't pay its Massachusetts ad subjects anything.)

Stephen M. Goldman, commissioner of the New Jersey Department of Banking and Insurance, says the ads are inaccurate. ''In our view, the reforms have been unusually successful," he said.

Here are the facts:

New Jersey residents pay the nation's highest premiums, as the ads say, but the data backing up those figures are from 2003, the same year New Jersey passed its reform law. New Jersey will probably always have high premiums relative to other states because it is so densely populated. The state is slightly smaller than Massachusetts with a third more people.

Insurers, including such giants as Geico and Progressive, have flocked to New Jersey since 2003, while existing companies have expanded. Prior to 2003, Goldman said, state officials worried that drivers wouldn't be able to find insurance coverage. Now, he says, companies are competing aggressively for customers.

New Jersey officials say the move to greater competition in 2003 saved most drivers money, but it's unclear how much. Goldman estimates overall savings of at least $500 million, but not all of that is a result of the 2003 changes. Insurance rates are trending down nationally. In Massachusetts, with no reform, rates have dropped about $316 million since 2003, says the Automobile Insurers Bureau of Massachusetts.

In assigning rates, Massachusetts insurers look primarily at the driver's record, how long he or she has been driving, the type of vehicle, and its garage location. In New Jersey, insurers look at many more factors, including a driver's credit score, occupation, education, and marital status.

In February, the Star-Ledger newspaper reported that Geico's rate book assigned a $1,686 premium to a 30-year-old single male living in Newark who works as a lawyer and has a master's degree. That same person, with his job changed to a janitor and his education changed to a high school degree, would pay $2,880, the Star-Ledger reported.

Goldman calls the Star-Ledger's Geico analysis a ''red herring" pushed by companies having trouble competing. ''We couldn't replicate the results in that example," adds Donald Bryan, director of New Jersey's insurance division.

James MacPhee, senior vice president at Liberty Mutual, said the New Jersey ads are wrong. ''Reform has been good for consumers in New Jersey, and reform would be good for consumers in Massachusetts," he said.

James Ermilio, senior vice president and legal counsel at Commerce, says drivers considered good risks in New Jersey have benefited from the 2003 changes, but drivers considered poor risks are paying more.

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By Bruce Mohl, Globe Staff

Bruce Mohl can be reached at mohl@globe.com. WATCH THE ADS

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