Insurance Commissioner poised to adopt sweeping auto insurance
reform, which is expected to harm over a million drivers, including
hundreds of thousands of drivers with clean driving records
MASSPIRG and the Center for Insurance Research, two leading consumer
groups, are calling for Governor Romney to halt lame duck rulemaking in
auto insurance.
Just
days after a new Governor was elected, Romney’s Insurance Commissioner,
Julianne Bowler, is set to hold a hearing on her proposal to revamp the
way drivers are insured. The new “assigned risk plan” would allow
insurers to reject drivers – even those with perfect driving records --
based on non-driving factors such as credit scores, income, education,
and home ownership.
The
best estimate is that over a million drivers, including hundreds of
thousands of drivers with clean driving records, would be rejected
under the Commissioner’s proposal. Rejected drivers would be randomly
assigned to another insurer. As a result, they would lose the freedom
to choose their insurer, would be subject to discriminatory
underwriting practices, and, in many instances, would face higher
insurance costs.
“Any
reform affecting over one million drivers should not be adopted by a
lame duck administration,” said Deirdre Cummings, MASSPIRG consumer
program director. “They had four years to adopt their reforms, but
failed.”
“The
Commissioner cannot tie the hands of the new Governor by trying to
squeeze these rules in during the waning hours of the Romney
administration,” said Stephen D’Amato, consultant to the Center for
Insurance Research. “It’s precisely these kinds of political games that
the voters overwhelmingly rejected on Tuesday.”
Specifically, the assigned risk plan would:
•
Allow insurers to reject drivers based on stereotypes. The new plan
would allow insurance companies to use personal information – such as a
driver’s credit score, income, education, and home ownership status
(i.e., whether the driver doesn’t own a home) – to reject drivers.
• Raise insurance premiums for many rejected drivers. As many as
hundreds of thousands of drivers forced into the plan could pay higher
premiums as a result of losing access to discounts (such as good driver
discounts and combined auto/homeowners insurance discounts) when
assigned to an insurer not offering the discounts.
• Limit choice. Rejected consumers would no longer have the right to choose their insurer.
• Fail to address the #1 Consumer Complaint – high premiums. While the
new plan clearly addresses the complaints of some auto insurance
companies, it would do nothing to address drivers’ complaints of high
premiums. The assigned risk plan does nothing to correct the main cause
of 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 auto insurance premiums by
approximately 30%, or about $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 driver.
