Insurance chief says changes drawing interest
Insurance Commissioner Nonnie S. Burnes told state lawmakers yesterday that her proposed rules for auto insurance competition are drawing attention from companies interested in doing business here.
Burnes said four firms that currently don't write auto insurance in the state have contacted the Massachusetts Division of Insurance. She declined to name them and said the move toward auto insurance competition was not being driven by the desire to have more companies selling policies here. Still, she said, more competition could exert greater downward pressure on rates.
The commissioner's proposal lays out how companies, starting next April, will set their own premiums subject to regulatory approval. Currently, all Massachusetts auto rates are set by state regulators.
Burnes's rules bar companies from using such socioeconomic factors as education, occupation, and homeownership in setting rates and deciding whom to insure. But she is allowing companies to use credit history in deciding whether to insure a driver. She has prohibited for a year the use of credit history in setting rates while she studies the issue.
Stephen D'Amato, a consultant to the Center for Insurance Research in Cambridge, said Burnes's approach will allow insurers for the first time in 30 years to reject a driver for coverage based on their credit history. Under Burnes's rules, a driver could still obtain coverage from another carrier or, failing that, be assigned by the state to a company.
John Kittel, executive vice president of Arbella Insurance Group in Quincy, said allowing the use of credit history in deciding whom to insure will indirectly allow its use for setting rates. He said a company could create multiple subsidiaries or tiers within one company, all with different base rates, and then assign customers to the different subsidiaries or tiers based on their credit history.
Burnes said yesterday she would decide later whether companies could set up rating tiers or have multiple subsidiaries. "Tiering in and of itself is not necessarily a bad thing," she said.
Bruce Mohl can be reached at mohl@globe.com.
