Mass. Commissioner Orders Long-Awaited Transition to Assigned Risk Plan

Massachusetts Insurance Commissioner Julianne M. Bowler today iorder the implementation of an assigned risk plan for the state’s private passenger auto insurance market. The assigned risk plan will replace the existing pooling mechanism and establish appropriate incentives for companies to fight fraud, according to Bowler.

Bowler’s final order comes after the Aug, 23 unanimous Supreme Judicial Court decision which upheld her authority to do so and after a public hearing Nov. 10 on the final rules for the plan.

The plan has been in the works for more than four years.

“Reform is long overdue. Massachusetts currently has the highest losses associated with high-risk drivers as compared to every other state,” said Bowler. “By implementing the assigned risk plan, insurance companies will no longer be able to disassociate themselves from the policies that they transfer to the residual market. Companies will now be responsible for all their policies, forcing responsible management of losses and a greater incentive to fight fraud in the marketplace, which means lower rates for drivers.”

The new ARP, called the Massachusetts Assigned Insurance Plan, will be phased in over a three-year period as implemented by Commonwealth Auto Reinsurers, which administers the state’s high risk system.

On April 1, 2007, all new business (i.e., newly licensed drivers or those not previously insured in the Commonwealth in the past year) that insurance carriers decline to write voluntarily will be placed in the ARP.

As a consumer protection measure, as of April 1, 2007, carriers will not be permitted to non-renew “Clean-in-Three” business for a three-year period to give the market the opportunity to adjust and CAR the opportunity to design a permanent protection for these good drivers.
Clean-in-Three” risks – estimated at 75 percent of the current market – are those drivers who have not had an accident or moving violation for the three-year period immediately preceding their application for insurance or renewal.

On July 1, 2007, drivers with 10 or more points (e.g., someone with two DUIs, six moving violations or three major accidents in the past three years) that insurance carriers decline to write voluntarily.

On April 1, 2008, all other business (except those that meet the criteria of “Clean-in-Three” risks) that insurance carriers decline to write voluntarily.

This order completes a regulatory process Bowler begun back in 2002 when first appointed to her post.

The industry is waiting to see whether the adminsitration of incoming Gov. Deval Patrick will go along with Bowler’s plan.

Source: Mass. DOI