A SOBERING report this week raises concerns that the Patrick administration's "managed competition" auto insurance plan could turn out to be a junker for perfectly good drivers considered poor risks in the eyes of insurers because they are young, unmarried or renters. The report casts a shadow over Insurance Commissioner Nonnie Burnes's August pledge that she would prohibit insurers from using socioeconomic factors in setting rates and deciding whom to insure.
The report, "How You Drive Takes a Backseat to Who You Are," uses the new rates filed by the five largest insurers in the state to show that a sample 27-year-old driver with a perfect record would still absorb an average 5 percent rate hike under the new insurance regulations. She takes the hit because she is a single woman who rents. The report then profiles the married couple upstairs who would receive a 14 percent decrease in their premium based largely on a multicar discount and the fact that they carry a homeowner's policy with the same insurer. Yet this 57-year-old couple caused four major accidents in the past six years. It's "who you are" not "how you drive" that will determine losers and winners under the new regulations, according to the report, published jointly by MASSPIRG and the nonprofit Center for Insurance Research.
The state Division of Insurance rejects the report. Division spokeswoman Kimberly Haberlin calls it "the same old baseless and misleading arguments" that have echoed since the Romney administration proposed that insurance companies set their own rates. Division officials also contend that the single woman in the sample could do much better by shopping around among the state's 19 auto insurers. As to the careless couple, officials contend they would have landed in a high-risk pool with limited bargaining power.
The two sides in this debate agree on almost nothing. But drivers from lower-income groups need to consider this question: Are discounts simply a sneaky way for insurers to get around the prohibition against using socioeconomic factors, such as marital status, education, homeownership, and race for rate-setting purposes?
It certainly looks that way. Multicar discounts make nice proxies for marital status. Good student discounts can be a convenient stand-in for parental income. Package discounts for auto and homeowner insurance policies leave renters out in the cold.
The old state-regulated system suddenly doesn't look so bad. It flattened premiums for urban and young drivers and still managed to reduce rates an average 21 percent over the last three years.
The Patrick administration is trumpeting the arrival of a major national carrier, Progressive Insurance, to the Massachusetts market. It's a sign supposedly that managed competition has arrived. But it's hardly an achievement if the weight of the new system lands largely on good Massachusetts drivers who can least afford it.
