Insurance Talk

Gumbo · Guest

Massachusetts Takes First Steps in Defining "Managed Competition"; PCI Will
Continue to Press For Positive Changes

August 29, 2007

BOSTON - The Property Casualty Insurers Association of America (PCI)
expressed guarded optimism today in response to the draft regulations,
released by the Massachusetts Division of Insurance, needed to introduce
competition into the auto insurance market.

"The draft regulations begin to put meat on the bones of the new "managed
competition" system for private passenger auto insurance in Massachusetts
and are an important first step in the process," said Frank O'Brien, vice
president and regional manager for PCI. "Unfortunately, the proposed
regulations focus more on the word 'managed' than they do on the word
'competition'. Nevertheless, the proposal represents progress. Rome wasn't
built in a day and reforming 30 years of over-regulation to bring more
choices to Massachusetts consumers in auto insurance will not come
overnight."

O'Brien continued, "PCI and the supporters of reform in Massachusetts are in
this for the long term and will continue to press for beneficial change."

The regulations call for a one-year transition from April 1, 2008 through
March 31, 2009. According to a summary of the regulations, the rules make
driver experience and driving records the primary rating factors, and
permanently ban insurers from using gender, marital status, education,
occupation, homeownership and other socioeconomic factors for rating and
underwriting. The department has indicated that the use of credit scores is
banned during the transition period, and will be studied further. The rules
preserve existing subsidies for urban drivers, facilitate comparison
shopping for consumers, and lay out procedures for the commissioner to use
regulatory authority to reject perceived "excessive" and discriminatory
rates. A public hearing on the regulations is scheduled for September 20.

PCI is composed of more than 1,000 member companies, representing the
broadest cross-section of insurers of any national trade association. PCI
members write over $194 billion in annual premium, 40.1 percent of the
nation's property/casualty insurance. Member companies write 51.3 percent
of the U.S. automobile insurance market, 39 percent of the homeowners
market, 32.1 percent of the commercial property and liability market, and
38.7 percent of the private workers compensation market.