Court green-lights changes for risky driver pool
No timeline for implementation
Insurance agents and companies across the Bay State remain in limbo about whether and when a new method of insuring high-risk drivers goes into effect, following a ruling earlier this month by the state’s highest court that affirmed the right of the state’s insurance commissioner to overhaul the system.
Commerce Insurance Group in Webster, which is by far the Common-wealth’s largest auto insurer with roughly 30 percent of the market, last year challenged the commissioner’s ruling, which had been set to go into effect Jan. 1, 2005. Commerce claimed the commissioner lacked the authority to institute such a system, and that only the legislature could make such a change.
A series of lower-court rulings favored Commerce. However, the most recent ruling reversed those earlier decisions, and appears finally to settle the matter.
Jim Ermilio, Commerce’s executive vice president for Massachusetts operations, declined to say whether the company would ask the court to reconsider. "It remains to be seen what the commissioner will do with this authority now that the court says she has it," Ermilio says. "The market was in much different shape in 2004 when she first tried. The residual market is in better shape, she has participated in fraud-fighting efforts and has done a number of other things to bring equity into the system."
While it seems likely that the commissioner would institute her plan, the Division of Insurance says it is still reviewing the decision, and has not reached a firm decision or timeline over how it will proceed.
Frank Mancini, president of Massachusetts Association of Insurance Agents, says agents are playing a waiting game. "We have to wait and see what the commissioner is going to do," he says. "I haven’t seen a lot of public comments from her, but nothing she’s said indicates she is not moving forward." Mancini says it is unlikely that the changes could be implemented by the beginning of the year.
Bill Cahill, vice president and group counsel at Hanover Insurance Group in Worcester, says the decision was a good step forward. "The vast majority of states use assigned risk formats, and certainly we can learn from those other states what works and what doesn’t work." Cahill sits on the governing committee of Commonwealth Automobile Reinsurers (CAR), the organization that oversees the residual market system through which high-risk drivers are insured.
Converting the current residual market system had been a major component of the auto insurance reform bills sought first by Gov. Mitt Romney, and more recently by a group of legislators, who argued that the change would help attract more carriers to the state.
State Rep. Bob Spellane, a Worcester Democrat and strong proponent of the most recent, failed bill, says implementing the new system would create administrative hassles for agents. But he adds that it would help attract new carriers to the state if, down the line, competitive rating is introduced.
He expects such a bill to be filed at the beginning of the next legislative session.
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