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Big national automobile insurers like Geico, Progressive, and State Farm Mutual Insurance appear to be taking a wait-and-see attitude about Massachusetts' move to managed competition.
Company officials say they are following developments in Massachusetts closely, but they aren't ready to jump into the market. A State Farm spokesman said additional changes in the marketplace are needed, while officials at other companies are saying little or nothing about what it would take for them to enter the market.
Peter Robertson, Massachusetts legal counsel for the Property Casualty Insurers Association of America, which counts many of the national companies as members, said the regulatory climate here is improving but is still uncertain.
"It's much too early," he said. "They're very cautious about entering these types of markets until the dust settles."
National automobile insurers shunned Massachusetts for years because its regulators set all auto insurance rates. But now the Patrick administration is moving to what it calls managed competition, under which insurers set their own rates, subject to regulatory approval. The administration has said that managed competition will lower rates for good drivers, expand policy benefits, and bring new competitors into the market.
So far, only Peerless Insurance, a Keene, N.H., subsidiary of Liberty Mutual Insurance of Boston, has indicated it plans to do business in Massachusetts. Peerless intends to file its own rates, but it would help Liberty, the state's fourth-largest auto insurer, cover a marketing niche, since Peerless sells insurance through agents while Liberty sells policies directly to customers.
Companies that want to do business in Massachusetts could file rates in February for policies renewing in May, or they could file rates later for policies renewing later in the year - assuming they have a license to operate here. But analysts say that many of the national carriers are waiting to see whether Insurance Commissioner Nonnie S. Burnes approves the rate plans that were filed on Tuesday by companies that already do business in the state.
Burnes has hinted that she will be free-market oriented in her reviews of the rate plans, but Attorney General Martha Coakley, who will represent consumers in the rate proceedings, has suggested that prices aren't dropping enough.
The other big concern about Massachusetts among national auto insurers is that Burnes's regulations prohibit the use of such factors as credit history, education, occupation, and home ownership in setting individual driver premiums. She has said she will review the prohibition on credit history after a year.
Douglas Nadeau, spokesman for State Farm, the largest US auto insurer, said his company is concerned about subsidies in Massachusetts that flow from suburban drivers to urban drivers and prohibitions on the use of such rating factors as credit history, education, occupation, age, and sex.
"Credit is a valid predictive tool," he said, reflecting the thinking of most insurers. "When you look at markets throughout the United States, these are very basic rating factors."
Nadeau said more steps must be taken by Massachusetts regulators. "They've taken the first steps in reforming the auto insurance market in Massachusetts, but there are still a lot of tools and flexibility that are needed to keep the rates of Commonwealth drivers down," he said.
Cristy Cote, a spokeswoman for Progressive, the nation's third-largest insurer, said the company hasn't jumped into the Massachusetts market but that shouldn't be interpreted as a lack of interest. "We continue to be interested," she said.
Officials at Geico, the nation's fourth-largest insurer, didn't return repeated phone calls. Warren Buffett, who runs Geico's corporate parent, Omaha-based Berkshire Hathaway Inc., told the Globe in August that he wanted the insurance company to operate in Massachusetts. He said Geico would prefer to use socioeconomic factors currently banned here, but the inability to use them wouldn't necessarily prevent the company from coming in.
One top official at an insurer already operating here, who asked not to be identified for competitive reasons, said his company is expecting national insurers to start doing business in Massachusetts late next year. He said he expects the Patrick administration to relax some of the prohibitions on rating factors by then.
Andrew Carpentier, regional marketing vice president and chief operating officer of Encompass Insurance, said his company is bullish on Massachusetts. He said the big national insurers who are not here, including Encompass's corporate parent, Allstate Insurance, are probably following developments here closely. Allstate is the nation's second-largest carrier.
"They want to see what managed competition shakes out to be in the next five to six months," he said.
Bruce Mohl can be reached at mohl@globe.com.
© Copyright 2007 Globe Newspaper Company.
