Massachusetts Auto Reform Frequently Asked Questions

What is going on with MA Auto Insurance in 2008?

You have probably heard that change is brewing for all of us that insure a personal automobile in MA. The plan, approved by the MA Insurance Commissioner, calls for a one year transition from April 1, 2008 through March 31, 2009 from our current system where rates are set by the state to "managed" competition. During this time there will be no change in how rates will be established based on the basis of sex, race, creed, national origin, religion, occupation, income, education, homeownership, credit score or age (Drivers age 65 or older will continue to see a reduction in rates as required by MA law.) In the remaining 49 states these factors, and more, are routinely used by insurance companies to set auto insurance rates - hence the Commissioner's use of the term "Managed" Competition for Massachusetts.

When does Managed Competition begin in Massachusetts?

“Managed Competition” arrives for Massachusetts auto insurance on April 1st!  This applies to all private passenger auto policies renewing on or after April, 2008.  In this second update, we will be focusing on the changes that Commerce Insurance Company has on file with the Division of Insurance for MA auto effective April 1.  Commerce’s new auto private passenger auto rates will be adding a number of discounts to their auto rates for policies beginning or renewing on or after April 1st:

Loyalty Discount.  Commerce will be rewarding existing Commerce insured’s if you have insured your auto without interruption with them for at least three years.  The discount will be 2% for three to four years; 3% for five to six years and 4% for seven years or more.
Account Discount    Commerce will be offering a 5% auto discount if you maintain both a private passenger automobile policy (excluding antique vehicles) with them and a homeowners policy with either Commerce or the Fair Plan.
AAA Member package Endorsement
Commerce will be offering a 4% AAA member group discount as well as add the new AAA member endorsement package.  The AAA member package endorsement  will automatically include up to an additional $30 a day to increase your substitute transportation coverage, up to $250 day increased loss of earnings for trials/ hearings, and cost coverage for replacing your vehicle (no deduction for depreciation for new cars for the first year or 15,000 miles (whichever comes first).   This package will also automatically include waiver of collision deductible , waiver of your glass deductible, and coverage for damage to cell phones, laptops, injury or death to pets and a $5,000 seatbelt and or airbag death benefit.

Not a member of AAA and prefer not to join?  Commerce is planning on filing an endorsement similar to the AAA Member Package endorsement noted above to add to non-AAA policies for a small additional premium.

Will managed competition effect premium costs?

We have been told the following by Commerce (based on their company averages) that:

• 76% will see a decrease in premium
• 44% will see between 5% and 15% reductions
• 12% will see greater than 15% premium reductions
• 9.6% will be the overall average premium decrease for those drivers licensed six or more years (class 10)

We have compared our auto insurance policies and demographics with Commerce and we anticipate that a higher percentage of our insured’s will be receiving premium reductions.  In addition, we expect to see a markedly lower percent of our insured’s that will experience a rate increase! 

What is MAIP (also known as the Massachusetts Auto Insurance Plan)?

The Division of Insurance has adopted a new assigned risk plan referred to as MAIP. MAIP has been created to serve the part of the automobile insurance market that companies do not willingly want to offer policies to. Since MA law requires that all vehicles be covered by insurance, insurers are required to share equitably in providing coverage even to those drivers who they would not otherwise do business with (unique to MA to the best of our knowledge). At this writing, nineteen (19) carriers will be participating in the "MAIP" plan. Our office will have access to 100% of all 19 (or more) MAIP carriers should your policy be assigned to the MAIP (unlikely for most insureds) when it renews on or after April 1, 2008.

How do I know if MAIP applies to my coverage?

 As you may recall from last month’s letter sent to our insureds, the Mass Commissioner of Insurance has adopted a new assigned risk plan (residual market) referred to as the MAIP.  The MAIP has been created to serve the part of the automobile insurance market that companies do not willingly want to offer policies to.   We estimate that less than 5% of our insured’s will be placed in the MAIP. In any case we will know approximately 75 days in advance of your renewal on or after April 1, 2008 if your policy has been assigned to one of the 19 MAIP carriers as the servicing carrier with our agency as the servicing agent. (The typical threshold for the MAIP will be any policy with an SDIP 10 or higher.)

Will we still be writing personal auto insurance with Commerce Insurance?

Absolutely! The Board of Directors of Commerce Insurance recently agreed to pursue a merger with a European company known as MAPFRE with a target date to coincide around the same time that MAIP becomes effective. Commerce/MAPFRE will use Webster MA as the base for US operations. We view this as very positive news. Commerce is the largest writer of automobile and homeowners insurance in MA. The proposed merger with MAPFRE will increase their total assets from slightly under $2 billion dollars to in excess of $17 billion dollars. This move is being made, in our opinion, to protect and increase Commerce's already dominating market share in MA. We anticipate that Commerce will continue to be the competition for Massachusetts personal insurance in 2008 and well beyond. However no one company can unilaterally be the most competitive across the state 100% of the time, and for that reason we are adding nine new auto insurance companies for 2008.

Will I have access to other auto insurance companies under the new "Managed Competition" program next year?

On November 27th we met with nine new auto insurance companies that will be participating in the new "managed competition" auto insurance plan started in April 2008. In early 2008 our office will represent a total of eleven of the nineteen companies writing personal automobile insurance in Massachusetts. This means that as a client of Anderson Group International, you will have access to more than half of the automobile insurance companies operating in MA in 2008. We have the automation and the support staff to find the program that is best suited for your coverage and budget! Please visit our website at www.anderson-group.com for regular updated information.

Where do we go from here?

From what we hear from the Division of Insurance, we expect that rates in MA will decline on average in 2008. It is unlikely rate decreases will be uniform across the state, we do expect that good drivers with a clean driving record, regardless of where you live, will enjoy additional premium reductions!
There are at this writing more unanswered questions about how managed competition will be implemented and priced than answers. We will keep you informed along this journey over the coming months on our website, email, newsletters and of course by regular mail.

Where can I get more information?

The (Massachusetts Association of Insurance Agents - MAIA) has a new consumer website with a more of information: http://www.massauto.com/faq.html

As always, please contact any of our licensed professionals, or myself with any questions you may have Monday through Friday at 781-834-1700 between the hours of 8:30A and 5:00P Eastern standard time, on our website using Live Chat, or by emailing insureme@anderson-group.com.