BIG WRECK: Massachusetts has the highest accident rate in the country, but higher insurance rates aren't the answer
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Here is what you need to know if you’re trying to make sense of the conflicting and often confusing radio and TV advertisements about auto insurance that are being broadcast around the clock: Governor Mitt Romney’s plan to reform the way auto insurance works in Massachusetts is bad news for consumers. It would make a less-than-perfect system even worse.Massachusetts is the only state in the nation that sets auto-insurance rates. It’s a system heavy with government intervention. And it’s an easy rhetorical target. It does, however, save many drivers — especially young city dwellers — from getting hit with punishingly high rates.
Most of the big, national insurance companies hate it. As a result, they refuse to offer policies here. A bunch of the biggest — including Liberty Mutual, MetLife, and Allmerica — want to change the way we handle car insurance in the Bay State. They’ve banded together and formed a “grassroots coalition” they call Fairness for Good Drivers.
Last year, this industry group backed Romney’s plan to allow insurers to set their own rates, so long as those rates don’t increase by more than 15 percent per year. The bill died, so this group is now promoting a new bill — soon to be introduced — that is expected to be much the same, with a few minor tweaks, including a phase-in over three to six years.
Needless to say, these advocates of so-called reform are not emphasizing the outrageously high and inflationary 15 percent annual rate hikes in their ads. Instead, they claim that under the current system, “Good drivers pay more for auto insurance so bad drivers can pay less.”
That’s a gross oversimplification.
It’s true that older suburban drivers currently pay a little more than they take out in claims, while younger city drivers pay less than they prompt in claims.
That’s not because of their driving ability, however; it’s because everyone’s more likely to be in an accident when they first learn to drive, and when they drive on crowded city streets.
Supporting the status quo are ads sponsored by a small group of local insurance companies that don’t want big national insurers getting a piece of the lucrative local business. Leading the charge is Commerce Insurance Company, of Webster, which last year earned nearly a quarter-billion dollars in profits. Putting local insurers even further behind the PR eight ball, the big insurers have a snappy name, while the local group has a real clunker: Massachusetts Coalition for Affordable Auto Insurance for All.
The debate over the airwaves is being carried to ridiculous lengths. The Coalition for Affordable Auto Insurance is warning Bay State residents not to make the same mistake New Jersey made. Now the fact of the matter is that New Jersey’s plan isn’t all that bad. But rather than defend it, Fairness for Good Drivers asks why anyone in their right mind would listen to people from New Jersey.
This may be good for a cheap laugh, but it doesn’t come to grips with the real reason why rates are so high here in Massachusetts.
