Auto insurance revamp moves forward
Assigned risk plan will be used starting in April
In a major change of Bay State’s auto insurance system, companies will cease pooling their losses and instead assume full liability for claims paid on their customers behalf under a long-fought plan set to go into effect in April.
The plan, says Insurance Commissioner Julianne Bowler, represents a more efficient way of distributing risks among drivers, and brings the Bay State more in line with the rest or the nation – 43 states currently use so-called assigned risk plans.
"It’s no longer a question of whether or not this will be done," says Bowler. The move is not without controversy: It follows two years of legal wrangling that ended with the Supreme Judicial Court earlier this year finally ruling that Bowler does have the authority to make the change without approval from the legislature.
"I’m just happy to finally be implementing it," she says.
Two big stumbling blocks remain, however. The first is the status of the so-called "clean in three" rule. Under the original plan, this was the right of drivers originally written through the assigned risk plan to come out of it if they maintain a clean driving record for three consecutive years. The court said more clarification was needed on this rule to ensure that drivers will still be able to secure coverage if all of the 19 companies in the state reject them when they come out. A public hearing on that rule is set for November 10.
But the bigger stumbling block will be the devilish details of actually running the assigned risk plan.
Starting on April 1, all new, rejected policies will be assigned through the plan. On July 1, all renewal business will be written through the plan.
Commonwealth Automobile Reinsurers (CAR), which had managed the current pool system known as the residual market, will oversee the administration of the assigned risk plan. It is currently working to build a computer system that will be used to automatically assign policies to different companies.
The time needed to design that new system is one major reason for the April 1 timeframe, Bowler says. If it works, it will allow agents to know instantaneously which company their client has been assigned to.
What is unclear is how the changes will affect agents.
Under the former system, agents known as Exclusive Representative Producers (ERPs) were assigned to individual companies, and could write any risk through the company they represented.
But now, ERPs and every other agency in the state, will be made Assigned Risk Producers, and all given equal ability to write business through the plan. Since ERPs – by virtue of their appointments – lack a voluntary contract with any company, it might be more difficult for them to place business.
And at least one problem will face every agent: Being asked to handle business with a company they have never dealt with. Frank Mancini, head of the Massachusetts Association of Insurance Agents, says that the procedures surrounding claims, payment plans and other aspects of the plan will be standardized, but that still leaves the potential for smaller problems to pop up.
"There is no question that there will be some situations that really cannot be standardized," he says. The extent of those problems will become clearer once the plan is instituted, he says.
Kenneth J. St. Onge can be reached at kstonge@wbjournal.com
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