BOSTON – Massachusetts Attorney General Martha Coakley made a few forceful and poignant proposals regarding ways to improve the auto insurance market and its rate-setting system after investigating the impact of Governor Deval Patrick’s market deregulation scheme.
The Attorney General, through a report released from her office last December 24, discussed a retailed reportage of current market operations, financial profits that insurance companies are gaining, and bulk of consumers who have to deal with larger price mark-ups.
Coakley deemed that many improvements have to be made with regard to offering better protection for consumer interest. Moreover, several observations, as well as suggestions to protect rate payers, were espoused in the said report.
The Attorney General admitted that while this new deregulated auto insurance system was introduced two years ago by the Division of Insurance with the intention of resulting in better rates for clients, customers may actually be getting less protection and benefits than expected.
Prior to 2007, although companies were allowed to give services at lower rates based on discretion, the state set boundaries for insurance rates. Coakley revealed that in the new deregulated system, companies were given the freedom and initiative to establish their own rates and use their own terms and conditions – even to the extent that applicants may be rejected.
Coined as ‘managed competition’, the deregulated system, which resulted in less transparency in rate-setting procedures, provided leeway for insurance to instantly begin seeking higher profits. Furthermore, insurers who have been found to create new policy provisions and rules have accordingly increased their fees placing unknowing customers and clients at a disadvantage.
Coakley also expressed concern that socio-economic status rather than driving record of consumers have become the normative standard for rating customers. Such consideration caused consumers across various age groups to pay higher rates regardless if they had a speeding ticket or an accident on record.
Several recommendations from the Attorney General’s report were given to promote more transparency, openness, and better consumer protections.
Some of the report’s recommendations include the following: (1) insurance companies must fully justify their decisions to extend discounts to factors other than those related to driving records, (2) complete rate proposals and reports should be filed at the Division of Insurance, (3) an insurance website should be created to provide detailed and actual side-by-side insurance quotes of all insurers, (4) complete removal of penalties in the event of early insurance withdrawals by clients; and (5) the ban on collection of vital personal information, including credit score, which are non-essential for insurance ratemaking.