Mass. Division of Insurance Reports Auto Rate Decision for 2004

Massachusetts Insurance Commissioner Julianne Bowler this week rejected the auto insurance industry’s request for a 12.4 percent average rate increase and signed a decision in the 2004 private passenger insurance rate case that will result in a 2.5 percent statewide average rate increase next year.

The smaller increase shaves $101.29 off the insurers’ requested $126.80 per vehicle increase. The new rate takes effec Jan. 1 and results in an average increase of $25.51 per vehicle and a statewide average annual rate of $1047.04.*

The decision reportedly recognizes the State Rating Bureau’s (“SRB”) argument that 7 percent of the 12 percent requested by the auto insurers was built into their profit request; a figure the SRB argued was too high. Bowler also pointed to the industry’s efforts associated with containing claim costs.

“Insurers’ use of procedures aimed at weeding-out unsubstantiated injury claims must be consistent. They must be vigilant in their efforts to uncover fraudulent claims. We will not pass along unnecessary costs to policyholders,” Bowler said.

The Commissioner’s decision reportedly found that the insurers’ cost-containment filing was deficient and the use of cost-containment programs were inadequate. Data filed by the insurers showed that the use of independent medical examinations dropped by more than 3 percent for personal injury claims and almost 9 percent for bodily injury claims between 2001 and 2002 and the use of special investigation procedures among insurers was inconsistent. These factors come at a time when insurer witnesses testified that fraud is not abating and may even be on the rise in the state.

Referencing recent efforts to crack-down on fraud activity in Essex County, Bowler directed the industry to identify by Feb. 1 additional regions in the Commonwealth to be targeted for concerted anti-fraud efforts. “Similar cooperative initiatives between the industry and law enforcement need to be undertaken, because this problem is not confined to any one city,” Bowler commented.

Also announced in the decision was a 0.9 percent average increase in commissions for agents from $113.00 per vehicle in 2003 to $114.00 in 2004.

* It should be clarified for readers that the average statewide rate does not necessarily reflect what any one policyholder will pay for premium in 2004. Actual premium is dependent on the types of coverages and deductibles chosen, number and types of vehicles insured, SDIP records and driver classifications, territorial assignment and any discounts applied.