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Michael Jonas | The Political Trail

Auto insurance plan faces local roadblock

State Senator Dianne Wilkerson fears the state's new auto insurance plan will benefit affluent suburbanites and cause premiums for her constituents to soar. State Senator Dianne Wilkerson fears the state's new auto insurance plan will benefit affluent suburbanites and cause premiums for her constituents to soar. (Essdras M. Suarez/Globe Staff/FILE)
Email|Print| Text size + By Michael Jonas
November 25, 2007

Governor Deval Patrick's plan to deregulate auto insurance took another step forward last week, as companies filed initial plans for rates under the new system. But for the reforms to take effect, the administration will have to get by the sea of tacks and nails being scattered in front of it by one of the governor's earliest supporters.

With all the subtlety of a sledgehammer, state Senator Dianne Wilkerson, Democrat of Roxbury, has been pounding away at the administration's plan to introduce "managed competition" into the state's auto insurance market.

Patrick's insurance commissioner, Nonnie Burnes, says that after 30 years of state-regulated auto insurance rates, it's time to join the other 49 states that allow insurers to compete for customers. Burnes says the new regulations she has issued, scheduled to take effect in April, will be a boon to consumers, who will see companies battle for their business.

But Wilkerson and her consumer-advocate allies say the benefits will be reaped by more affluent, suburban drivers, while lower-income urban dwellers will see their already pricey premiums soar even higher.

The new regulations would prohibit companies from using factors such as income, occupation, and credit history in establishing premiums, but other factors could be used in setting rates.

Wilkerson and other critics say that will open the door for insurers to set rates using proxies for income and credit history, such as home ownership or level of past insurance coverage, that will drive up costs for those who can least afford them.

"We've had people in the industry who've been diming them out to tell us how they'll get around the regulations with proxies," Wilkerson says.

Wilkerson is pushing legislation that would allow insurers to use only driving records when calculating rates for consumers. There should be a "rational basis for pricing," says Wilkerson, something that "is all shot to hell" under the administration's plan.

Under those new regulations, says Stephen D'Amato, a Cambridge-based consultant for the Center for Insurance Research, it will be smart business for insurers to figure out ways to lump drivers into groups based on socioeconomic characteristics. He says charging higher rates to those who don't own their own home, for example, may capture proportionately more drivers who commit insurance fraud. But swept up in such a rating scheme would also be lots of poorer residents who have good driving records.

"We are going from a system that focuses on how you drive to one that focuses on who you are," says D'Amato, a former director of the state rating bureau in the Division of Insurance.

"I think the vast majority of people in Roxbury are going to do worse."

In a Sept. 10 letter to Burnes asking her to rethink the scheme, Mayor Thomas Menino called the proposed changes a "form of economic redlining."

But in a conference call on Monday with reporters, Burnes said she saw no evidence in last week's initial filings by insurers of anything that "sounds like those proxies people are talking about."

The average premium will go down 7.7 percent, according to the filings, though that is less than the decrease drivers enjoyed this year under the rate-setting system.

Wilkerson's effort to sidetrack the new insurance plan has set off a firestorm among some of her legislative colleagues, who accuse her of trying to derail the deregulation plan without even seeing how it plays out.

Wilkerson offers no apologies for the sharp criticism she has offered of the plan from the start. "Some people don't have to put their hands in the middle of an open fire to know they're going to get burned."

Michael Jonas can be reached at jonas@globe.com.

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