Massachusetts Family Insurance

Insurance Commissioner Saves Merit Rating Appeals Board

In a little bit of news that was never mentioned during the rush towards competitive automobile insurance in Massachusetts was the companies demand that the Merit Rating Appeals Board be ended. The thinking was that the companies are now setting their own rates and penalties for bad drivers, the state no longer needs to maintain the board that hears surcharge appeals from the insurance consumer. The companies would set up their own surcharge appeal boards to hear their policyholders appeals on accidents.

The state board was an independent board that heard consumers appeals, since the state had previously determined the surcharge fees. Consumers have had the ability to appeal surcharges based upon the rules of the road and the state's rules on determining fault. Appeals saved as much as $8 Million in surcharges last year.

The rules on fault determination now will depend on the percentage of fault. The company that paid your claim and assesses the surcharge on your automobile policy will also determine your fault on appeal. This seems to lack the balance of power that the consumer had with the old system.

It a ruling last week, the Insurance Commissioner decided to maintain the Merit Surcharge board. So chalk one up for the consumer for now.

What does Competitive Rating mean?

So let's get started. What does this mean?

In early 2007, the Massachusetts Division of Insurance issued notification that it planned to end more than 70 years of state fixed automobile rates and begin a new era of competition. Commissioner Burnes used the term "Managed Competition." The term reflects that although we will have competition from the insurance companies, but the commissioner will exercise tight control on the rates in the states. She has stated that the insurance companies cannot raise rates higher than 10% this year. She can also determine whether the rates and company rules are too arbitrary, discriminatory or violate public policy.

It also means that the insurance commissioner is holding the rates for urban drivers and senior citizens at artificial levels in spite of what the insurance companies would like to charge. The time limit on "Managed Competition" is three years. After that companies are free to set rates based upon territories.

One company representative once told us that the companies would increase the rates for urban drivers by as much as 30%. In 1977, when competitive rating was initially attempted, the companies did just that and the commissioner at the time, James Stone, who is now the chairman of Plymouth Rock Insurance Company, canceled competition and forced the system back to state mandated rates.

A New Era in Massachusetts Auto Insurance

Massachusetts has joined the ranks of the 49 other states in this country and become a "competitively rated" state for auto insurance.

Customers have approached me asking about the new automobile market with questions like the ones listed below.

What does this mean? Will Competitive Rating be good for me?

The answers are not that easy to come by, at least, not as easy as the media says they will be. It certainly will not be the panacea that the industry has stated it will be either. I have started this blog with the sincere hope of providing some answers to questions like those above as well as provide information about personal insurance. Maybe to give you some information about what to expect in the coming months and years.