Greg Roach's Berkshires Blog
Saturday, July 21, 2007
  Why did my rates rise 20% for less coverage when I moved here?
I wanted to post on this earlier, but hordes of tourists have kept me from my computer for more than a few minutes at a time.

On first glance, these reforms to the way auto insurance rates are formulated seem to make sense. If the data from New Jersey's switch to competitive rates is an accurate comparison, I think the fact that rates dropped on average by $53 a year since 2005 speaks volumes.

I do believe in a strong Insurance Commissioner. I have lived in states where the insurance companies did whatever-the-heck they wanted and the results rarely seemed to benefit the customer, but the idea of allowing companies to lure drivers doesn't bother me in the slightest.

There are readers of this blog who know a whole lot more about this subject than I, so if any of them care to leave their thoughts, your fellow surfers would be most grateful.
I am willing to see how the Commish does on this, but I am skeptical. Right now, firms such as Geiko and Progressive can come to Massachusetts, but they don't because they can't make money under our rate structure. (So they say.) However, if we let them set their own rates, they insist people will pay less.
Now, let me repeat this; they can't make money under our rate structure so they stay out of the market but if we let them set rates, they will come in and make money and lower rates. Got it? One could say, "but Dan, how could this be?" Well, it is because they all want to cherry pick the best drivers that have little or no claims and have lots of money so they are assured of being paid on time. That is good corporate strategy, but where does that leave the rest of us?
And how does one measure good drivers? I am like everyone else who hasn't much sympathy for bad drivers that cost us all money, but how about our parents and our kids who may not be bad drivers but get put into a bad category because seniors and teens file more claims than any other cohort of drivers.
If we discontinue to subsidize urban drivers, I don’t think many of us out here would care. However, if $6,000 yearly insurance bills in Chelsea lead to an explosion of uninsured drivers that hit our insured drivers and raise the cost for all of us, then we should care. If insurance companies are allowed to use factors other than experience ratings then we should care. What if insurers decide that we, in Berkshire County are such a small population that they don’t want to bother to write insurance out here? Where does that leave us re: competition for rates? What if they decide that we are poorer with less than state average earnings, or that we have more rural or poorer roads, or that we have less quick access to health care and hospitals so we are probably more risk than urban drivers where poorer people use public transportation and are close to emergency room care? Does this mean that we shouldn’t introduce competition? No, but we should have a healthy skepticism when a company comes in and says that regulated rates are too low but if you allow the company to set rates, they will lower them. That doesn’t work for huge blocks of drivers, so we should watch this.
Greg, there is a very good reason that we have higher rates. We are a small state with a lot of cars. If we want better rates, we, as a state, should drive more carefully. Rates have gone down over the last three years as we have a better handle on fraud and theft. Cutting down on claims can help all of us achieve lower rates.
Thanks Dan. Fair enough, but does this proposal allow for cherry picking? Will insurers be allowed to raise rates on some to afford enticing others? I got the impression from the media coverage that such practices would not be part of this.

The incident that got my attention regarding the Commonwealth's auto insurance practices occurred 4 years ago when I moved here.

For the first couple of months, our family lived in Williams College housing while we searched for a house of our own. We registered and insured our cars in Williamstown and were shocked by the jump in our run of the mill AAA insurance policy between a high risk city in Washington State and a low risk town in MA. THEN we moved to North Adams and got socked with another 10% hike for moving 4 miles (even though we live on the quietest street in the city). Evidently North Adams has higher claims than Williamstown, which strikes me as odd since the average vehicle value is probably considerably less on this side of the magic line. Are our theft and fraud rates that much higher?

Keep us posted on anything that comes by your desk, if would be so kind.

Thanks again!
My two cents: We have Progressive insurance and our rates are considerably less than when we lived in Ma for the same coverage (100/300 I believe and same deductable). We recently added a teen driver (with their own car)and our rates went up $260 for the year. Could Williamstown rates be less because those that can afford the type of car that is typical in that town can ultimately self-insure themselves. They have coverage to be legal and for really big stuff, but the fender benders they pay out of pocket?

Mr. Bosley makes a good point about forcing uninsured/underinsured drivers. Perhaps the penalty for driving w/o insurance should be greater. If you have a registered car without insurance your license is automatically suspended. You get caught driving and the car is impounded and sold at auction. The penalties for getting caught with fireworks in your vehicle is more harsh than no insurance - at least in NY state, not sure what it is in MA.
The penalties for getting caught with fireworks in your vehicle is more harsh than no insurance -

heh. I could point out a few more in this vein, like the fact that you can't get aliquor license in MA if you have any sort of drug conviction (i.e. simple possesion, etc...) But if you owned a bar, got drunk in your own bar, ran a lady over causing severe injury and spent time in jail over the offense, you could still legally qualify for a license (which is exactly what is happening in a certain town in our region.)

But back to the subject, i think no insurance should be automatic impoundment and/or license suspension. Pretty simple.
My pennies worth....Insurance is a scamm...and those that back unfettered rule by insurance companies are getting kick backs and bennies from the insurance industry, plain and simple. Dan is right, more oversight into their business practices is way over due! Dan is correct, more regulation not less!
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