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Life for drivers in Massachusetts stays fair

When you live in a capitalist country, it's easy to think that free market competition keeps the consumer safe. If anything goes wrong, the consumer can simply change to another supplier and, at a stroke, the problem is solved. Except life does not have to work in a fair way. When large insurance corporations are looking to make a profit to keep their shareholders happy, they do not think of their customers as people with problems. The policy holders are just the means to make a profit. So, government has to step in with regulations to strike a balance. The idea is to limit the companies to a reasonable profit and reduce the risk that consumers will be gouged. Although the GOP is against the idea of any regulation, every state in the union has a licensing system for insurance companies. Only companies with a licence can sell policies in each state, and the condition of getting and keeping a licence is accepting some degree of regulation. How much regulation varies from state to state, but the essence is to offer some protection for the consumers.


In Massachusetts, there has been a rumbling dispute about the extent to which the local insurers should be regulated. Until last year, the state imposed quite strict rules on the type of policies that could be sold and the premium rates. The current system is one of managed competition with the companies having more freedom on the new products and the premium rates at which they can be sold. The problem focussed on the Board of Appeals run by the Insurance Commissioner Nonnie Burnes. If a driver is involved in a collision, the insurer is allowed to decide which driver is at fault and to add a surcharge to the premium payable by the driver in the wrong. This surcharge can be up to 50% of the original premium. Obviously, an insurance company has a direct interest in holding its driver to be at fault so the premium can be increased. Hence the need for an appeal system. The current Board finds that the surcharge is not justified in more than half the cases referred to it.

The people of Massachusetts were therefore shocked when the Commissioner announced the Board would be shut down. This would leave surcharged drivers with nowhere to go. Strangely, when consumers shop round for a change, the other companies tend to rely on the current company's finding of fault, rate the driver as more of a risk and only offer Massachusetts auto insurance at higher rates. What should be fair competition between the companies producing lower premiums is the sharing of information about drivers resulting in higher premiums. The state legislature was therefore quickly into action to propose legislation ordering the Commissioner to retain the Board. After a stand-off with the bill moving through the legislature, the Commissioner gave in and announced the Board will be retained. Lacking confidence, the legislators are continuing with the passage of the bill. The interests of the consumer must come first when it comes to auto insurance.

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