Insurance revamp pushed back
Patrick tasks group to re-examine risk plan
Thousands of insurance agents and upwards of a million drivers must continue waiting to find out how the Commonwealth plans to assign their insurance policies to the Bay State’s carriers, following the decision to halt a plan finalized in the lame duck days of the Romney administration.
In the last month, Gov. Deval Patrick removed the former Insurance Commissioner Julianne Bowler from her post, put on hold her department’s move to institute a so-called assigned risk plan and tasked a group of insurance advocates and insiders to reconsider how the state runs its highly unusual auto insurance system. Bowler’s fight for that change brought a high-profile legal and political confrontation with the state’s largest insurer, Commerce Insurance in Webster, which eventually lost that battle.
It proved a bittersweet victory for Romney and Bowler, who finally forced through changes a month before Patrick took office.
The change would have been significant. Assigned risk plans, managed by the state, randomly place high-risk policies with companies based proportionately on those companies’ market share. More than 40 states use a variation of that method.
Massachusetts instead assigns to carriers specially contracted insurance agents, known as exclusive representative producers, who are empowered to write any type of high-risk policy. Under that system, all carriers share the losses incurred by high-risk drivers. Under an assigned risk plan, they would incur losses from their own drivers only.
Opponents of the current system, including The Hanover Insurance Group Inc. and The Premier Insurance Group, both of Worcester, claimed that the pooling system discouraged companies from investigating fraud, and its administrative quirks allowed some carriers to game the system, and pay less than their fair share of losses.
But proponents of the system, including Commerce and a number of consumer advocates, said that it helped keep insurance rates down, guarantee choice for consumers and – following changes to the agency that administers the pool – that the gamesmanship had already been taken out of the system.
The Division of Insurance had planned to begin using Bowler’s plan on April 1, a plan that is now on hiatus.
Steve D’Amato, a consultant with the Center for Insurance Research in Cambridge, says that Patrick’s decision to take a second look at the proposed changes was "a wise thing to do."
"There is nothing time sensitive about when they start it," he says.
The group tasked with re-examining the new plan includes high-profile advocates on both sides of the reform debate such as Susan Scott, of The Premier Insurance and Paula Gold, now an executive with Plymouth Rock Assurance Corp. in Boston, which had opposed many of the Romney’ proposals. Scott and Gold both spent time in state government in a regulatory capacity.
Acting Commissioner of Insurance Joseph Murphy has put the ARP plan on hold for 90 days, and has scheduled a hearing on it for Feb. 15. The decision appears to kill the proposal, at least for the time being.
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