Mass. Decision Against Competition Reportedly Bad for Policyholders

August 11, 2003

The Massachusetts Insurance Commissioner’s decision to maintain the “fix-and-establish” rate-setting mechanism is bad news for most Massachusetts drivers, according to the American Insurance Association (AIA).

“The ‘fix-and-establish’ system is simply government price fixing,” said Paul Moran, AIA vice president, northeast region. “The result is that consumers have few choices among the small number of insurers doing business in the state. Many consumers are paying much higher than needed premiums to subsidize riskier drivers under this system.”

In the decision, the commissioner does not reportedly allow companies to offer “optional endorsements” for enhanced rental car or towing coverage options.

“Even refusing to take a tiny step toward competition through the allowance of ‘optional endorsements’ needlessly limits consumer choice in auto insurance coverage. This decision simply maintains the status quo of a very bad system where good drivers are forced to subsidize high-risk drivers,” concluded Moran.

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