Insurance Deregulation in Massachusetts Not Delivering Results


According to a report commissioned by the attorney general’s office of Massachusetts, deregulation in the state’s insurance industry has failed to lower premium fees; it has increased insurer revenues, diminished consumer protection and created confusion among customers. This report was made two years after the insurance industry was opened to other players and also included recommendations on how to improve conditions in the marketplace.

Insurance Deregulation in Massachusetts Not Delivering ResultsAttorney General Martha Coakley said that deregulation has yet to live up to its promise of cheaper fees for policyholders and has produced disappointing results so far.

This report also cited the fact that many consumers do not scout around for good insurance deals.  Coakley mentioned that her office was particularly concerned with the prevailing practice of insurance companies of rating a customer based on socio-economic variables rather than driving history.

Below are several industry findings included the report:

1)     Regulation would have resulted to better and more cost-efficient premium rates across the board.  Policyholders, whose rates were reduced after deregulation, would have gotten bigger reductions under regulatory policies.
2)     Immediately after the industry was opened to other players, insurers started to jack up rates to widen their revenue spreads. Some rates increased by over 150% after deregulation.
3)     Customers have no easy access to prices of insurance policies, discounts, promos, special prices, and amounts that insurers charge per individual.  The content found on the Web site set up by the Division of Insurance was also found to be inadequate and unreliable in terms of providing relevant information to people looking for insurance tips.
4)     Customers are deprived of information regarding discounts and special prices they are entitled to, experienced challenges getting quotes from agents, and were given different quotes by insurance agents working for the same insurer.
5)     Many Massachusetts residents purchase auto coverage from independent agents, who only advise a select number of insurers, thereby limiting the choices of customers. Most agents deliberately do not acquaint themselves with policies of new industry players and only affiliate themselves with companies that provide substantial commissions and overrides.

Several of the recommendations made in this report that are deemed to make the marketplace kinder and more friendly to customers include setting up a Web site where consumers can make side-by-side comparisons of insurance rates and premiums, banning the practice of obtaining personal information that are not needed in the rating, prohibiting use of credit scores in determining or assessing a customer’s rating, removal of penalties for consumers who opt out of an auto insurance policy prematurely, and enhanced rate proposals.