New Auto Insurance System

New Auto Insurance System

The Massachusetts auto insurance system is changing for consumers who buy or renew their insurance policies on or after April 1, 2008. Governor Patrick and the Division of Insurance are deregulating the auto insurance market and implementing a system called “Managed Competition,” which means that insurers, for the first time, will set their own prices for auto insurance. After April 1, 2008, companies will charge consumers different rates and calculate premiums based on factors that were not used in the past. As a result, some people will be charged more, others less, and each insurance company will offer you a different price. Because of the wider array of prices, coverages, discounts, and benefits that will be available under Managed Competition, all Massachusetts residents who renew or begin an auto insurance policy on or after April 1, 2008, should shop carefully for auto insurance.
In order to protect the interests of consumers, the Attorney General’s Office will closely monitor the actions and representations of auto insurance companies throughout the transition to Managed Competition. If you have questions or concerns about Managed Competition, you should contact the Division of Insurance at (617) 521-7794. If you believe an insurer has treated you in an unfair or deceptive manner, please file a complaint with the Attorney General’s Office or contact the Attorney General’s Insurance and Financial Services Division at 1-888-830-6277. In addition to investigating violations of law, the Insurance and Financial Services Division provides voluntary mediation services to consumers who are having problems with insurance companies.

What Is Changing?
Under Massachusetts’ old auto insurance system, you would be charged similar premiums regardless of which insurance company you chose. Any differences in the premiums charged by insurance companies related largely to the discounts offered by different insurers.
Under the new Managed Competition system, premium amounts, rates, coverages, discounts, and benefits may vary widely by insurer and will be based on an assortment of new rating factors. As a result, you will have to shop carefully to find the coverages best suited to your needs and the best prices for those coverages. In addition, insurance companies will not be required to offer some of the discounts that they were previously required to offer, such as the Public Transit, Multi-Car, and Driver Training discounts. However, for now, most insurers will continue to offer these discounts and many new types of discounts may be available.

When Will These Changes Affect Me?
The new policies governed by the new Managed Competition system will be offered starting April 1, 2008. You will be affected by this change when your current auto insurance policy expires. You should start shopping for an auto insurance policy several weeks in advance of your current policy’s expiration date. If you don’t know when your current policy expires, check your most recent insurance bill or call your insurance company to find out.
If your current policy expires between now and April 1, 2008, you will renew under the old system and will begin participating in Managed Competition when your policy expires, in 2009.
You can cancel your existing policy after April 1, 2008 and sign up for a new policy under the new Managed Competition system. However, before doing so, you should make sure the new policy provides the coverages you are looking for, and that you know exactly how much the new policy will cost. You should be aware, however, that insurers will charge you a penalty if you cancel your policy after the first 30 days, so, if your current policy renewed before March 1, 2008, it may not pay to switch.

Who Will Benefit from These Changes? Who Will Be Hurt by Them?
Although many drivers will see their premium go down during the first year of Managed Competition, insurers estimate that about 20 percent of drivers will experience a premium increase.
Under Managed Competition, your driving record will have a less significant effect on your premium than it previously did. Young drivers (meaning people in their 20’s and early 30’s), senior citizens, urban drivers, renters, and unmarried drivers are most likely to see their premium rise or to receive only minor premium decreases.
For insurance policies that are renewed between April 1, 2008, and March 31, 2009, insurance companies cannot raise insurance rates by more than 10 percent. Of course, if you move, have an accident, receive a ticket for a moving violation, or buy a car, your premium may increase by more than 10 percent.