After two years of legal battle, the Supreme Court of Massachusetts finally ruled on an issue involving the Massachusetts Division of Insurance (DOI) against an insurer and an association of insurance agents.
The lawsuit, which was filed in 2008, started after the government agency released a decision exempting new auto insurance companies within the state from covering high-risk motorists. Spearheaded by Arbella Mutual Insurance and the Massachusetts Association of Insurance Agents, they sought to nullify said decision on what they consider to be an “ultra vires act” or an act exceeding authority made by then insurance commissioner Nonnie Burnes. The group claims that Burnes had favored national companies that were new to the state.
It must be noted that before 2008, newcomers in Massachusetts’ insurance market were not exempt from covering high-risk motorists. Opposition rose on what they claim to be a disadvantage to old insurers because it requires only them to insure high-risk drivers. As such, they alone would shoulder losses which may be incurred during this period.
The highest court, on the other hand, cited certain advantages which Burnes’ decision had brought. It stated on its ruling that even if new companies don’t incur liability in covering high-risk drivers, they still contribute to “administrative costs” and to the Massachusetts Automobile Insurance Plan which also covers drivers who are considered to be high-risk. The issue about giving commissions to agents on policies which are no longer part of the plan was also upheld.
Although no statement from Burnes had yet been released, her leadership in the insurance commission enabled what may be referred to as a “managed competition auto insurance system.” It is a form of deregulation aimed at attracting new insurance companies. Before, driving records and the place where the vehicle was registered dictated the price of premiums and rates were determined by regulators. And since insurers were mandated to accept almost every consumer, the market was not that attractive to some companies resulting in very little competition in prices.
To date, 11 insurance companies have been added to the insurance market. Joseph Murphy said that the deregulation is “properly rewarding consumers and providing more flexibility and choice.” Murphy, who was recently named insurance commissioner, accepted the ruling as good news.
The opposition on the other hand, still contends that the DOI’s decision created what it refers to as an unfair situation. Arbella spokesman Doug Bailey said that domestic insurance agencies were disadvantaged over national insurers who do not provide jobs and tax dollars to the state.