Auto insurance rates rising
or, No Shit, Sherlock
from Lawrence Eagle Tribune

Fraud and an insurance system "badly in need of repair" will drive up auto insurance rates another 7 percent next year in Massachusetts, state officials said.

For the first time in state history, the average driver will pay more than $1,000 a year for basic insurance, and thousands of drivers will pay more than twice that amount.

The 7 percent rate hike was imposed yesterday by state Insurance Commissioner Julianne M. Bowler after weighing the insurance industry's request for a 12 percent hike and Attorney General Thomas Reilly's recommendation for a zero increase.

All sides pointed to the high incidence of fraud in cities like Lawrence and Lynn as a major factor in keeping rates so high in the Bay State.

Insurers said the increase granted by Bowler was meager in light of a statewide jump in injury claims, many of them believed to be fraudulent. Bowler said drivers should not be forced to bear the burden of fraud alone. Insurers must do more to uncover bogus claims, she said.

Reilly went further, suggesting that insurers have little incentive to crack down on fraud as long as rates are set by the state and there is no competition among insurance companies.

"The Massachusetts auto insurance market is badly in need of repair and cannot be allowed to continue to operate in its current state," Reilly said. "Consumers would be far better served by a competitive market where there is real incentive for innovation and to keep down spending and fraud."

What? Do my ears bewitch me with sweet whispers of Xanadu? Sense from an elected official? Watertown's own Tom Reilly has this genius idea- insurance companies are better at insurance than state goverment. IBNR where are you?

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Auto insurance rates rising

By Meredith Warren
Staff Writer

Fraud and an insurance system "badly in need of repair" will drive up auto insurance rates another 7 percent next year in Massachusetts, state officials said.

For the first time in state history, the average driver will pay more than $1,000 a year for basic insurance, and thousands of drivers will pay more than twice that amount.

The 7 percent rate hike was imposed yesterday by state Insurance Commissioner Julianne M. Bowler after weighing the insurance industry's request for a 12 percent hike and Attorney General Thomas Reilly's recommendation for a zero increase.

All sides pointed to the high incidence of fraud in cities like Lawrence and Lynn as a major factor in keeping rates so high in the Bay State.

Insurers said the increase granted by Bowler was meager in light of a statewide jump in injury claims, many of them believed to be fraudulent. Bowler said drivers should not be forced to bear the burden of fraud alone. Insurers must do more to uncover bogus claims, she said.

Reilly went further, suggesting that insurers have little incentive to crack down on fraud as long as rates are set by the state and there is no competition among insurance companies.

"The Massachusetts auto insurance market is badly in need of repair and cannot be allowed to continue to operate in its current state," Reilly said. "Consumers would be far better served by a competitive market where there is real incentive for innovation and to keep down spending and fraud."

Reilly also said he was considering an appeal of Bowler's ruling, saying it "dramatically reduces past efforts to keep auto insurance rates down for Massachusetts drivers."

The state -- the only one that sets rates -- has some of the nation's highest auto insurance premiums.

The average insurance bill will rise about $69 per car, from $978 last January to $1,047 next month. The increase comes on top of an 8 percent hike a year ago that added $74 to the average cost of coverage.

Rates vary from community to community depending on their accident and claim rates, with communities with higher than average claim rates paying more.

With 3,000 accidents a year, Lawrence drivers now pay an average of $2,015 a year. Many of those accidents are believed to be staged to cash in on personal injury insurance.

But fraud in Lawrence is has also helped drive up rates across the region. While they pay among the highest rates in the state, Lawrence drivers would pay even more if their rates weren't "subsidized" by drivers in less accident-prone communities, like Andover and North Andover.

The subsidy costs drivers in such towns as much as $73 a year, according to figures from the Automobile Insurers Bureau of Massachusetts. Without the subsidy, drivers in Lawrence would pay more than $650 more a year than they already do.

Fraud is one reason Massachusetts maintains a regulated insurance market. When the state tried an open-market system in 1977, rates skyrocketed in high-risk cities as insurers eliminated subsidies to entice lower-risk suburban drivers.

The costs of fraud -- including the death of a Lawrence grandmother in a staged accident in September -- have prompted a crackdown in Lawrence by insurance and law enforcement officials. The crackdown, which has resulted in 19 arrests so far, is believed to be responsible for a decline in the number of accidents in the city over the past three months.

Local insurance companies say they expect the effort will eventually drive down rates but not until 2005, the next time auto insurance "territories" are adjusted. Each community is assigned a numerical territory based on its accident record.

"I would say claims are down in Lawrence by 25 percent," said Lenny Degnan, a city insurance agent. "If the crackdown on fraud continues, the rates should go down."

Material from The Associated Press was used in this report.

High cost of fraud

Chart shows the current average auto insurance bill in local cities and towns and what portion of the bill goes to subsidize rates in communities with high numbers of fraudulent accidents. A negative subsidy number indicates how much more drivers in that community would pay without the subsidy.

COMMUNITY AVERAGE BILL SUBSIDY

Amesbury $869.86 $68.25

Andover $910.85 $73.18

Boxford $910.85 $73.18

Georgetown $869.86 $68.25

Groveland $869.86 $68.25

Haverhill $1,144.75 $39.37

Lawrence $2,015.08 - $659.92

Merrimac $869.86 $73.18

Methuen $1,240.42 - $14.88

Middleton $1,030.64 $44.98

North Andover $964.44 $43.93

Salisbury $964.44 $43.93

West Newbury $773.56 $68.71

Source: Automobile Insurers Bureau of Massachusetts. Figures are for the standard insurance package.

posted by prof_booty | 12:04 PM