Auto rates may drop but not for all in 2007

Auto insurance rates are expected to take a big drop next year in Massachusetts, but about a third of the state's drivers won't see any change in their premiums for at least a year.

A state law passed in 2004 changed the effective date of the 2007 auto insurance rates from Jan. 1 until April 1, which means anyone renewing their policy during the first three months of the coming year will continue to be billed at the 2006 rate for all of 2007.

Backers of the move say it will eliminate wasteful paperwork, doing away with the need to issue provisional bills for people renewing policies at the start of the year and then issuing corrected bills once officials rates are released.

But drivers affected by the change are grumbling that they will be forced to pay higher rates than everyone else for a longer period of time. Some industry analysts have speculated that rates may fall 10 to 15 percent on April 1.

"It's a pretty crazy way to do it," said Alan Lipson of Revere, who recently received a renewal notice from his automobile insurer, Liberty Mutual Insurance of Boston. "I'll always be a year behind."

A Liberty spokesman could not be reached for comment.

Stephen D'Amato , a consultant to the Center for Insurance Research in Cambridge, said the change was pushed through the Legislature by the state's insurance agents, not insurers. But he said the insurers will be the ones who will benefit financially, largely because Insurance Commissioner Julianne M. Bowler set rates much too high this year and those rates will now remain in effect for another year for a third of the state's drivers.

"It's clearly a bonanza for the industry," D'Amato said.

Daniel Johnston , president of the Automobile Insurers Bureau of Massachusetts, said companies would receive only a short-term benefit. Over time, he said, rates will go up and drivers renewing policies early in the year will be able to hold onto their lower rates longer than people renewing after the April 1 effective date.

"Over a five- or 10-year period, you should see more rate increases than decreases, just with inflation," he said.

Francis Mancini , chief executive of the Massachusetts Association of Insurance Agents, said all drivers will take advantage of the expected 2007 rate decrease, but drivers renewing policies early in the year will have to wait until 2008 to benefit.

"They're going to enjoy it, but they're going to enjoy it at a different time," he said.

Mancini said agents pushed for the change in law because the current system causes a lot of confusion. The state's insurance commissioner normally issues rates for the coming year in mid-December, but it takes until mid-February before those rates are converted into premium calculations that can be mailed to customers. With an effective date of Jan. 1, customers renewing during January, February, and March were sent provisional bills using existing rates and then sent corrected bills later. "There was a lot of confusion, a lot of costs," Mancini said.

John C. Gallagher , president of Gallagher Insurance Agency in Dorchester, said he wouldn't feel comfortable advising customers to skirt the new effective date, but he said nothing legally prevents them from trying to take advantage of lower 2007 rates sooner.

Gallagher said a driver with a renewal date in January or February could cancel his policy April 1 and take out a new policy with another insurer. He said there is a financial penalty of as much as 5 percent of the annual premium for canceling early, but it might be worth it for some drivers, depending on the size of the 2007 rate cut.

He said drivers renewing policies in March could possibly transfer to another carrier and face no penalty because there is a 30-day grace period when no penalty applies.

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