Governor overstated state insurance gap

Governor Mitt Romney has overstated the disparity between the number of automobile insurers in Massachusetts and other states in making his case for legislation that would overhaul the auto insurance system here.

The governor and his aides have insisted that the Massachusetts auto insurance system is in crisis because so few companies operate here, particularly when compared to other states. But, in pushing for sweeping changes in the state's auto insurance system including the ability of companies to set their own rates, Romney and his allies in the industry have made the paucity of companies here seem much worse than it actually is.

Christopher Goetcheus, a Romney administration spokesman, insisted the governor's numbers were accurate, although he acknowledged they may have compared different things.

''There was no conscious attempt to skew the numbers upward," Goetcheus said. ''All I can say is the disparity, no matter how you slice it, is tremendous."

Charts handed out by Romney at the unveiling of his auto insurance bill earlier this month undercounted the number of auto insurers in Massachusetts and as a result showed that Connecticut has more than eight times as many insurers. An association representing insurance regulators says a more accurate comparison would show Connecticut with about 2.5 times as many insurers.

''Whatever side of the debate you're on, it's important that you start with the facts, and these aren't the facts," said Paula Gold, senior vice president and regulatory counsel at Plymouth Rock Assurance Corp., which opposes the governor's bill.

''It is so misleading," added James A. Ermilio, senior vice president and legal counsel at Commerce Insurance in Webster, another opponent. ''They're not being straight with drivers to blow up the system."

For more than a year, Romney has been trying to refashion what he has called the state's ''Soviet-style" auto insurance system to make it more like the systems in other states. He says his goal is to halt the exodus of companies leaving the state and attract national insurers who would offer lower rates to those drivers considered better risks. According to a 2004 consultant's report for the state Division of Insurance, 34 companies have pulled out of Massachusetts since 1990.

Romney filed legislation that would gradually give auto insurers more power to set customer rates. Currently, Massachusetts is the only state that has regulators set all the rates.

Charts handed out by Romney at a June 1 press conference about auto insurance showed Massachusetts with just 19 carriers, compared to 161 in Connecticut, 133 in Rhode Island, 123 in New Hampshire, and 118 in Vermont and Maine.

''With so few insurers doing business here, we can no longer pretend that our system is healthy and benefiting our citizens," Romney said at the time.

After the Globe began asking about the source of the numbers, Goetcheus said the state Division of Insurance relied on data from the National Association of Insurance Commissioners, a group that represents insurance regulators. That data included any company collecting premiums of more than $1,000 from drivers.

Using that data Massachusetts has 36 companies, not 19. Asked about the discrepancy, Goetcheus said the Division of Insurance decided to use the lower number for Massachusetts because that's how many companies are actively selling insurance to drivers across the state. That number excludes companies that are niche players, selling to antique car owners or other smaller groups of drivers.

But the numbers the governor used for other states included the niche players as well as subsidiaries of the same company set up to cater to different types of driver risks. In effect, Romney selected the lowest possible number for companies operating in Massachusetts and the highest possible number for companies operating in other states.

Eric Nordman, director of research at the National Association of Insurance Commissioners, said the most accurate way to compare company totals would be to tally the number of parent companies operating in each state with more than 0.01 percent of the market, big enough to weed out many niche players.

Nordman said there are 21 parent companies, or insurance groups, in Massachusetts that fit that description. The same data shows Connecticut with 52 such groups, New Hampshire with 45, Rhode Island with 48, Maine with 43, and Vermont with 42.

Goetcheus said the exact number of companies is irrelevant. He said a disparity exists and it's accentuated by the heavy concentration of business here in the hands of a few major companies. He said the five biggest insurers in Massachusetts insure close to 65 percent of the state's drivers.

He said that if financial markets entered a long downturn or a major hurricane destabilized the homeowner's insurance business of a leading auto insurer, the entire auto insurance market could be plunged into chaos because there are so few companies here.

Gold at Plymouth Rock said Massachusetts may have fewer overall auto insurers than other states, but it has roughly the same number of larger-size companies, which tend to handle the bulk of the business. Data compiled by her company indicates Massachusetts has 12 companies with market shares of more than 2 percent, one more than the national average of 11.

Those 12 Massachusetts insurers control 94.5 percent of the market, the second-highest concentration in the country behind Hawaii. New York also has 12 companies with market shares greater than 2 percent and those 12 firms control 82.2 percent of the market.Bruce Mohl can be reached at mohl@globe.com.