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Bringing Competition to Auto Insurance in Massachusetts

When I was running for state rep in ’04, one of my “stump speech” issues was auto insurance. I talked about how the law permitted the insurance commissioner to annually make a formal declaration that competition for insurance in Massachusetts was impossible, and then fulfill the prophecy by imposing price controls. I talked about how it resulted in higher insurance prices for most car owners. I also talked about how the state was forcing good drivers to subsidize bad ones, how people making riskier choices were being subsidized by people making safer choices.

I am, of course, delighted that Governor Deval Patrick’s appointee, Nonnie Burnes, has decided to open the door to competition (well, at least crack the door open).

The usual set of naysayers are starting up their chorus. Check out this Globe editorial, and then do some of the math with me. The Globe cites a MassPIRG statistic that one million drivers will be left without choices in the new system. It notes that there are four million autos in Massachusetts. By my math, that’s claiming that 25% of drivers will be in this high-price, no-choice deadend. The editorial also relays Burnes’s statement that 80% of Massachusetts drivers subsidize the 20% riskiest drivers. Which means that . . . there are some people who are currently subsidizing other drivers, paying above market rates, that won’t find an insurer in the new system? That doesn’t pass the smell test. Everyone who gets to stop subsidizing bad drivers will enjoy rates that fall even faster than they are now.

MassPIRG, and by association the Globe, is engaged in some classic fearmongering. I notice that most of the people who will see higher rates live in cities. I also note that MassPIRG is a strong advocate of using public transportation. Do you think MassPIRG has considered that if the cost of driving a car in the city goes up, that more people will use public transportation?

One last thought: When Mitt Romney was governor, he got to appoint his own insurance commissioner. I’d really like to hear him try to explain why he couldn’t have made this change. And then I’d look at the list of his contributors for people in the insurance industry.

Here’s hoping that the changes stick. Let’s put the costs where they belong.


Pingback from Dan Dunn’s Podium » Insurance Reform: Look Who’s Talking
Time: August 13, 2007, 11:33 pm

[…] One of the pro-reform quotes is from an insurance company with their own agenda – they want reform so they can enter the market.  You have to read his words with a grain of salt. But what does the insurance commissioner get out of this?  Nothing that I see.  She’s the closest to an independent voice that the article finds.  And she says that it is time for change.  I agree. […]

Pingback from Dan Dunn’s Podium » The Joys of Insurance Reform
Time: August 18, 2008, 11:06 pm

[…] year is different. At long last the state is permitting price competition! I got a quote over the phone and two online, including one from Progressive. Progressive offered a […]