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									                                                                 For more information:
                                                                    Deirdre Cummings

                                                                       Steve D’Amato
                                                        Center for Insurance Research

                FACT SHEET HB 5021 – Auto Insurance Bill 6.8.06

Massachusetts insurance regulations currently prohibit many types of anti-consumer
discrimination that most other states allow. For example, in setting premiums
Massachusetts insurers must give more weight to an individual’s driving record and less
weight to incidentals like where that person happens to live. And insurance companies
here are barred from using such discriminatory factors as credit scores, home ownership,
marital status, education level, and employment status to raise drivers’ rates or deny

Under the guise of “reform,” the proponents of the auto reform bill want to change all
that. They want to eliminate these hard-won consumer protections so that huge national
insurance companies like State Farm, GEICO, and Progressive will start selling insurance
in Massachusetts.

It’s certainly true that if we eliminate enough consumer protections we can get any
insurer to come here. Then some insurers would get a new market in which to make
money, and Massachusetts consumers would get higher premiums and a slew of
anti-consumer pricing practices that have been outlawed here for decades.

At a June 5th press conference, Chairman Ronald Mariano said in response to a question
about how his plan would affect our auto insurance rates that his proposal “isn’t about

In fact, HB 5021, An Act Reforming Private Passenger Automobile Insurance in the
Commonwealth, will lead to higher not lower rates, will lead to discriminatory
underwriting and pricing practices, and will not address the root cause of our high

Specifically, HB 5021 will:

     1. Result in Higher Premiums

             o Last year our current regulated system resulted in a record 8.7% average
               rate reduction for all Massachusetts drivers. It is expected that our
               current system would again result in a similar rate decrease for 2007,
               primarily due to a decline in underlying insurance costs. But HB 5021

          freezes the rates set by the state for the bodily injury and personal injury
          protection coverages, even though current law would be expected to
          produce a decrease in those state-set rates.

       o HB 5021 allows auto insurers to deviate from state-set rates up or down
         by 5% for 2007. Insurers can already deviate down from state-set rates
         and are not doing so. Allowing them to deviate up can only lead to
         higher rates than the current system.

       o HB 5021 allows insurers to raise individual rates (as opposed to
         statewide average rates) by 15% for the liability coverages and does not
         cap individual increases at all for the collision and comprehensive
         coverages, which are purchased by most consumers.

       o HB 5021 fails to address the main reason for our high premiums – our
         highest-in-the-nation accident rate. The only road to lower premiums is
         through cost reduction. If we pursued a comprehensive
         cost-containment effort that improved our worst-in-the-nation accident
         rate to just second worst and attacked fraud as we did in the city of
         Lawrence, we could cut insurance premiums by approximately 30%, or
         over $300 on average per car per year. Without dealing with the
         underlying costs, we will not see any overall decline in premiums, but
         rather a shifting of premium dollars – some people would pay more and
         others pay less, based on factors that make no sense to the average

       o HB 5021 allows insurers to increase statewide average rates an
         unlimited number of times during a year by at least 7% each time,
         starting in 2009.

       o HB 5021 allows drivers with perfect driving records to be placed in an
         assigned risk plan in 2008 and beyond, subjecting them to rate increases
         with no rate caps.

2. Allow insurers to give much less weight to driving record than currently
   required and to use discriminatory rating factors such as occupation,
   education, credit scores, home ownership, etc.

      Massachusetts currently requires insurers to give more weight to driving
      record than any other state. HB 5021 would change that by allowing
      insurance companies to charge rates based on criteria such as
      homeownership, marital status, age, sex, education, employment, amount of
      insurance purchased, and other rating criteria that are currently used in other
      states but are not factors under our current rating system. While companies
      cannot refuse to provide insurance based on factors such as age, sex or
      marital status, these factors will be used in setting rates. Therefore, many

     drivers with perfect driving records would end up paying higher premiums
     due to the application of these other rating factors. In addition, while the bill
     bans the use of credit scores in setting rates, insurers get around that in other
     states by refusing to insure drivers with low credit scores in their subsidiary
     companies with the lowest rates, and instead offering them insurance at a
     higher rate from one of their many other subsidiaries.

3.   Result in premium increases even for the best drivers in many urban

     o HB 5021 eliminates the subsidy or “rate flattening” mechanism for the
       drivers in urban areas that already pay the highest rates and replaces it
       with the system used in Connecticut. As a result, drivers in urban areas
       such as Brockton, Everett, Jamaica Plain, Lynn, Randolph, Revere, and
       Springfield could receive rate increases. Drivers in Dorchester, Hyde
       Park, Roslindale, and Roxbury would see their rates soar – by over 25%
       on average. Even drivers with perfect driving records would receive
       these increases.
                                                                                         Formatted: Indent: Left: 0.42", No
                                                                                         bullets or numbering


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