A competitive auto insurance system debuts in Massachusetts in three weeks, and the collective wisdom of consumer advocates, insurance executives, and independent agents boils down to this:
Shop till you drop.
The average decrease in rates for drivers across the state is expected to be 7.8 percent, according to the Division of Insurance. But for the best deal - one that fully exploits a motorist's driving profile for maximum savings - there will be no substitute for pounding the pavement, speaking to agents, and calling competitors.
"It's going to take a lot of legwork," said Deirdre Cummings, legislative director for the Massachusetts Public Interest Research Group. "We are completely changing the way people are buying auto insurance in Massachusetts."
What's different is that for the past 30 years, state regulators have set auto insurance rates and carefully restricted the types of insurance coverage consumers could buy. Agents joke that you could get any flavor of auto insurance you wanted - as long as it was vanilla. There was little price variation and barely any payoff for comparison shopping.
Under the new system, dubbed managed competition, insurance companies are free to set their own rates, subject to minimal state oversight.
And they can try to lure customers by offering most any kind of bells, whistles, and gimmicks - what industry officials sometimes call product features.
Insurers have already launched aggressive marketing campaigns using billboards, broadcast commercials, and print and Internet advertising to attract consumers.
Despite the marketing onslaught, many drivers aren't fully aware of what the changes could mean to their wallets.
"I think about auto insurance all the time," said David Jenks, a restaurant operator and real estate investor from North Reading who pays about $2,000 a year to insure a 2007 Chevrolet Tahoe. "It's a huge expense you have to watch out for."
But Jenks said he did not know that under the new system he can start shopping for a policy before his existing coverage runs out in September.
"I'd be remiss not to check it out," he said.
Secret agent man
To figure out how to decide on a policy, begin by considering where you buy auto insurance.
About 80 percent of the 4 million personal auto policies in Massachusetts are sold by independent insurance agents, who typically sell insurance for about five companies.
Direct-sales companies sell through their own agents, as well as telephone sales representatives and the Internet.
Regardless of whether you now buy through an agent, an agency is a good place to start. It can provide quotes for more than one company. Also, the complex decisions at the heart of auto policies are best explained in person.
"The best thing you can do is work with a trusted agent who knows any special circumstances that might present opportunities for savings," said Susan K. Scott, senior vice president and general counsel at Travelers of Massachusetts, which sells through independent agents and has about 7 percent of the state's auto market.
If you don't have a trusted agent, finding one is a lot like finding a good cardiologist - seek recommendations from family, friends, and co-workers.
The complexity can make informed shopping feel like preparing for the bar exam. An agent will quickly move from easy questions - such as where you live and what kind of car you drive - to technical queries, such as, "Do you feel comfortable with $100,000/$300,000 coverage limits for bodily injury caused by an uninsured motorist?"
There's little substitute for slogging through the minutiae and learning the 12 parts of an auto policy. The Massachusetts Association of Insurance Agents has a good online guide to buying a policy at massauto.com.
A good agent will take the time to explain each part of the policy on the coverage selection page - known within the industry as a dec, for declaration of coverage.
Consider your assets - much of which may be tied up in your home - and whether it's worth the extra cost to protect them from a freak accident with an uninsured motorist. And some types of coverage may be unnecessary. For instance, if you have towing coverage from AAA, there's no reason to sign up for Part 11, otherwise known as towing and labor.
The declaration of coverage is split into two parts. The first is compulsory insurance - you must buy it. Compulsory coverage includes minimal levels of payments should you injure another driver or damage property in an accident. The second part is optional coverage, such as for collision damage to your car.
In all coverage decisions, it's important to remember that to lower out-of-pocket premiums, you must increase out-of-pocket deductibles. It's a trade-off between paying up front against the possibility of paying if you make a claim.
Many agents recommend higher deductibles as a way of decreasing the annual cost, particularly for drivers with older cars that might not be worth repairing after a serious accident.
The step-by-step completion of coverage limits will result in a basic rate. The fun really begins when you start looking for ways to lower that rate. Under the new system, companies are offering a broad array of discounts. They begin with some that were featured under the old system. Groups such as AAA, credit unions, or employers can qualify you for discounts of up to 10 percent off the basic rate.
Other chestnuts include discounts for drivers with low annual mileage, those who commute on public transit, and autos with antitheft devices and airbags.
With greater freedom to concoct products, insurers are branching out. Some offer a discount for hybrid cars. Several offer discounts for students who maintain at least a B average in high school or college. Many are offering discounts for homeowners who buy their hazard insurance through the same company.
Fun with policy endorsements
Beyond the gimmicks, companies are also rolling out new types of coverage that could result in savings for some drivers.
For example, Hanover Insurance of Worcester and others offer an accident-forgiveness feature under which drivers may not see their rates go up if they had an unblemished record before the incident. Typically, drivers face surcharges and pay higher rates for five years if they are found to be at fault in an accident.
In what could be the insurance industry's answer to Jordan Furniture's "Sofa With a Secret," Plymouth Rock Assurance is offering a "disappearing deductible." Under certain circumstances, a motorist making a claim will not have to pay the deductible.
Another innovative feature, offered by Hanover Insurance Group and others, is gap coverage. In the past, if a late-model car was in a crash and was written off as a total loss, the amount due on the loan could be more than the car's current market value. The owner would have to write a check - often a hefty one - to pay off the bank. Gap coverage pays that amount if a car is totaled.
"Some of the new features are fluff, and some are meaty," said Steven Aronson, owner of Aronson Insurance, an independent agency with offices in Newton and Needham.
The new features allow motorists to create a more personalized policy than previously available. But they also have the potential to confuse.
"Our number one tip is that with all of the various discounts, credits, and policy enhancements, drivers have to make sure they are comparing apples to apples when looking at competing rates," said Frank Mancini, president of the Massachusetts Association of Insurance Agents.
We want your business (maybe)
Discounts are aimed at the type of drivers the insurance companies want to attract. Not every driver will save equally under the new system.
"The best deals will be for people that have more than one car, or insure their car and home with us," said John Donohue, chief executive of Arbella Insurance Group in Quincy. Moreover, Donohue said, every insurance company is competing for those ideal drivers that meet insurance companies' expectations of "low risk."
"They all want the wealthy, Volvo-owning professional who lives in the suburbs with no young drivers at home," he said.
The flip side is that some less desirable drivers won't do as well, said Henry Risman, president of Risman Insurance Agency in Medford.
"The perfect customers will save a tremendous amount, maybe 25 percent compared to last year," said Risman. "But there's a segment that's going to pay more. The person who has one car, doesn't own a house, and had one small driving incident recently will not be benefiting from the new system."
In addition, companies have the option to turn away drivers they consider poor risks. Under the new rules, recently licensed drivers, those with 10 or more surcharge points, or those who have not been insured in Massachusetts in the previous year can be rejected and assigned to the state's high-risk pool.
Companies also have found ways to steer unattractive business in another direction. Some companies' price-comparison websites will deliberately give high-risk drivers lower quotes from competing insurers, to send those drivers elsewhere, according to agents.
But the solution for drivers with spotty records is actually fairly simple: more shopping.
Some companies will be hungrier for business in a competitive market, and will offer lower rates to gain market share.
Be forewarned, though: Next year, when those insurers may not be as hungry for business, the rates may increase.
Jeffrey Krasner can be reached at krasner@globe.com.
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