Legislative panel OK's auto insurance bill

A key legislative committee yesterday approved an auto insurance bill that would give carriers more autonomy in setting rates while continuing but reducing subsidies for urban drivers.

The measure, which would phase out state-set rates and phase in competitive rate setting over the next five years, is likely to get a vote in the House but its prospects for passage in the Senate appear slim.

Representative Ronald Mariano of Quincy, the House chairman of the Financial Services Committee, gained passage of the bill with the votes of just nine House members. He did not consult the Senate chairman of the committee or other Senate members.

``There was a feeling that they were not interested," Mariano said.

Senator Andrea F. Nuciforo Jr. , the Senate chairman of the committee, called Mariano's bill ``dead on arrival" if it makes it to the Senate.

``This is a dreadful proposal," Nuciforo said. ``It is one of the most consumer-unfriendly measures I've seen in some time."

At a State House press conference, Mariano described his bill as a more consumer-friendly version of legislation filed almost a year ago by Governor Mitt Romney. Mariano said his bill was designed to make Massachusetts insurance regulation more like other states in the hope of attracting more carriers.

Mariano said his bill would maintain the same subsidies that currently flow from suburban and rural drivers to urban drivers, to keep their premiums affordable. But after the press conference he acknowledged that the proposed subsidy system, modeled on what exists in Connecticut, would probably lead to lower subsidies.

Stephen D'Amato , who is affiliated with the Center for Insurance Research in Cambridge, said the decline in subsidies would increase premiums by 25 percent on average Roxbury, Dorchester, Hyde Park, and Roslindale.

The bill calls for the state's insurance commissioner to set rates for 2007 while allowing insurers, in the aggregate, to deviate upward or downward from those rates by 5 percent. The allowed deviation from the 2007 base rate would rise in increments to 10 percent by 2011.

Rates for individual drivers would be allowed to rise or fall by a greater amount, but Mariano said the allowed premium increases for liability coverages, which represent two-thirds of a typical driver's premium, would be capped at 15 percent.

Other key provisions:

Drivers that no insurer wants to cover voluntarily, currently about 7 percent of the state's 4 million drivers, would be randomly assigned to companies and charged higher, unrestricted premiums set by a quasipublic board.

Insurers would be barred from using credit scores to set rates, but critics said insurers could use credit scores in deciding whether to insure a driver. For the first time, insurers would also be allowed to charge teenage drivers different rates based on their sex.

Insurers would be assessed $2 million annually for antifraud efforts and $1 million to fund a consumer website.

The 25 percent premium discount for drivers over 65 would be retained, even though Mariano said the discount was not warranted.

Bruce Mohl can be reached at mohl@globe.com.