Shortly after joining the Patrick administration, Insurance Commissioner Nonnie S. Burnes decided to overhaul the state's auto insurance system. The past year has been a flurry of hearings, legal maneuvers, filings, and rulings, and the new system debuts April 1. Globe reporter Jeffrey Krasner spoke with Burnes this week about the upcoming changes.
Q. You live in the city and you drive a 1999 Saab. When does your policy renew, and how much are you going to save?
A. It renews in October, and I haven't had that conversation with my agent yet. I'm going to renew before my policy expires.
Q. Do you urge our readers to renew before their policies expire?
A. I urge them to look at their policies and decide if that's a good idea or not. They should look at what their current company and what competitors are offering. For most people, the new offerings will be better than what they're getting now. It's not only rates. People who have had a good experience with their agents may stay with them, but price will be a big driver.
Q. For most people, when they look at their coverage selections page, it's just a mass of numbers. What should consumers focus on when they're speaking with their agent?
A. I had that conversation with my agent, and even I had a little of the same reaction. I just kept asking questions. Go down, line by line, and keep asking questions until you're satisfied.
Q. Some folks in the industry for a long time have asked, "Who is Nonnie Burnes? We know she used to be a judge, but how can she think she can come in and master the intricacies of auto rate setting in a few months?" What do you say to these people?
A. I actually think I came to this job with a lot of useful skills. I've had years of experience taking complicated subjects and explaining them to other people. That's what trial lawyers do. And as a judge, I needed to understand something well enough to write an opinion. I've had decades of experience asking questions.
Q. Why did you decide to change the system?
A. My staff said that on Dec. 15 you have to set the auto rates. The first step is a competition hearing. My staff said I didn't need to worry about that. I asked why we were holding a hearing on competition if it didn't matter. Every single person who testified said there is a lot of competition in our system, even those who were not in favor of change. I thought if there's a lot of competition here, why am I fixing the rates?
Q. Some people are surprised that a Democratic administration would dismantle a regulated system and replace it with a free market system.
A. I think this is a very consumer-friendly change. Consumers are very savvy. They want choice. They don't want the government telling them what they can buy.
Q. What happens after the new system goes into effect April 1?
A. We have to make sure that consumers get the benefit we anticipate. We have to keep looking at the rate structure and the company filings to make sure they comply with our rules. We have to monitor the market health of the industry and each of the companies.
Q. In recent rate hearings, you prevented Attorney General Martha Coakley from getting more information about company rate-setting. Why?
A. This is a completely different structure from fix-and-establish. The attorney general's inquiry wasn't appropriate under managed competition.
Q. Going forward, does the attorney general's office play a smaller role in consumer advocacy for auto insurance rates?
A. They play a smaller role in the rate-setting process. But they are not less valuable as consumer advocates. They have to look to see if companies are adequately representing what they're selling, and look at whether rates are fair and reasonable, and how the companies are treating their customers.
Q. Can companies use socioeconomic factors such as credit scores or income, or their proxies, in deciding who gets discounts?
A. I don't think they are. There's this view that if you own a home, you are by definition a wealthy person and getting a benefit. But there are a lot of people who own homes who aren't wealthy. I want to make sure people are treated fairly in the way companies set rates. The companies can compete for consumers with discounts, but the savings don't come out of the pocket of other consumers. I'm just not willing to assume these are proxies for socioeconomic factors unless I have some data, and I don't have any data on that.
Q.What I'm hearing you say is that you have prohibited using these socioeconomic factors from rate-setting, but in the meantime if the insurance companies want to use them in creating discounts, that's OK.
A. I don't think they look at them in terms of socioeconomic factors. They want to get business. They want to package auto with homeowner's policies so they can write more business. That's what they're after. These are really group marketing plans, and their cost of acquiring new customers is much less if they can sell to groups. I don't know if those factors are proxies for the socioeconomic factors in terms of those marketing plans, but they serve a separate function. I don't know that the companies are using them as socioeconomic factors.
Q. Have you asked them that?
A. No, I haven't asked them that. My actuary says they don't have enough information to know whether that's true or not.
Q.We've had one company, Progressive, enter the Massachusetts auto market, and others have expressed interest. Is managed competition a success?
A. From my point of view, it's a success so far. The proof will be in the pudding when consumers start to buy policies and we see what rates they get.
