MASSPIRG urges
Regulators to put back Consumer Protections
MASSPIRG urged Insurance Commissioner Nonnie Burnes to
include vital consumer protections in her proposed auto insurance regulations
at a formal hearing today.
“We all like competition when it works,” said Deirdre
Cummings, MASSPIRG’s Legislative Director, “but we’ve seen enough failures to
know that without proper safeguards, businesses will seek to add to their
bottom line at the expense of the public and the consumer (remember the current
mortgage crisis, toxic toy recalls, ENRON, and student loan kickback scams, to
name a few examples).”
With proper rules, oversight and information our competitive
market can serve the consumer. But, as we have seen all too often, powerful
interests are working to undermine our safeguards.
Despite its flaws, our existing
auto insurance system had some important consumer protections: 1) Rates are primarily
based on our driving record - using just
driving record, experience and territory as the factors in setting rates; 2)
consumers are protected from being unfairly rejected/ turned down by insurance companies
through CAR – or a reinsurance system; 3) rates are kept from being excessive
or unaffordable in urban communities and for new drivers through rate
flattening; 4) and finally, our current
system has produced a whopping 21% decrease in rates over the last three years
and would have cut rates roughly 10% more next year. That’s because accident
and injury claims, which are the primary cause of our high rates, have finally
begun to fall, and state regulation (until now) had passed savings from such
reductions in claims directly on to all consumers.
Any new plan – competitive
or not – must be measured against what consumer have today. Consumers should
have a plan that preserves next year’s 10% rate decrease, protects our right to
choose any insurer, and allows companies to compete for our business based only
on our driving record.
But that is not what these
proposed regulations will do.
Among other changes, MASSPIRG urged the commissioner to:
Among other changes, MASSPIRG urged the commissioner to:
To protect consumers against unfair and discriminatory practices and to improve the ability of regulators to protect consumers, the rules should expressly list all the rating and underwriting factors that may be used by insurers. A motorist’s driving record and experience should be the only factor an insurer can use to deny coverage altogether.
Rates and products should be standardized, uniformly disclosed, and made accessible to the public on the Division of Insurance’s website. Consumers should be able to compare rates, products and practices for every insurance company offering insurance. Each insurer’s underwriting methodology should be available on the website for public access. This will allow consumers to make informed choices and allow regulators to catch new unfair or discriminatory rating and underwriting factors.
Credit scores and all other socioeconomic factors must not be allowed for use in underwriting or rating.
The Commissioner should mandate a comprehensive plan to reduce our highest in-the-nation accident rate, which is the single largest factor driving our premiums. Without such a plan, consumers will fail to see any meaningful rate reductions in the long term.
Click here to view testimony for additional information.
